UC-NRLF 


LIBRARY 

OF  THE 

UNIVERSITY  OF  CALIFORNIA. 

GIFT    OF 

Class 


Circuit  Court  of  the  United  States 

For  the  Eastern  Division  of  the  Eastern 
District  of  Missouri. 


UNITED  STATES  OF  AMERICA 


vs. 


STANDARD  OIL  COMPANY  AND  OTHERS. 


Brief  of  the  I/aw  on  Behalf  of  Defendants 
Standard  Oil  Company  and  others. 


JOHN  G.  JOHNSON, 
JOHN  G.  MILBURN, 

Of  Counsel. 


C.  G.  BURGOYNB,  72  to  78  Spring  Street,  New  York. 


Circuit  Court  of  the  United  States 

For  the  Bastern  Division  of  the  Eastern 
District  of  Missouri. 


UNITED  STATES  OF  AMERICA 


vs. 


STANDARD  OIL  COMPANY  AND  OTHERS. 


Brief  on  Behalf  of  Defendants  Standard  Oil 
Company  and  others. 


JOHN  G.  JOHNSON, 
JOHN  G.  MILBURN, 

Of  Counsel. 


Circuit  Court  of  the  United  States 

FOR  THE  EASTERN  DIVISION  OF  THE 
EASTERN  DISTRICT  OF  MISSOURI. 


UNITED  STATES  OF  AMERICA 
vs. 

STANDARD  OIL  COMPANY  and 
others. 


BRIEF     FOR     STANDARD     OIL     COM- 
PANY AND   OTHERS. 

The  Theory  of  the  Bill. 

The  gravamen  of  the  bill  is  an  alleged  con- 
spiracy to  restrain  and  monopolize  the  trade  and 
commerce  in  petroleum  and  its  products  among 
the  States  and  Territories  of  the  United  States, 
the  District  of  Columbia,  and  foreign  nations,  in 
which  Mr.  John  D.  Rockefeller,  Mr.  William 
Rockefeller,  Mr.  Henry  M.  Flagler  and  others 

230521 


have  been  engaged  since  the  year  1870.  The 
operations  of  the  conspiracy  are  divided  into 
three  periods :  one  extending  from  1870  to 
1882  ;  another  from  1882  to  1899  ;  and  the  last 
from  1899  to  the  present  time.  The  character- 
istic ascribed  to  the  first  period  is  the  purchase 
and  acquisition  of  interests  in  concerns  engaged 
in  different  branches  of  the  oil  business  for  the 
purpose  of  fixing  the  price  of  crude  and  refined 
oil,  limiting  their  production,  and  controlling 
their  transportation.  The  characteristic  ascribed 
to  the  second  period  is  the  formation  of  what  is 
known  as  "  The  Standard  Oil  Trust  ",  by  which 
various  independent  firms,  corporations,  limited 
partnerships  and  individuals  engaged  in  the  oil 
business  turned  over  the  management  of  their 
businesses  to  nine  trustees.  The  characteristic 
ascribed  to  the  third  period  is  the  vesting  of  this 
control  and  management  in  the  Standard  Oil 
Company  (of  New  Jersey)  as  a  holding  company. 
The  bill  then  proceeds  to  treat  each  of  these 
periods  in  detail. 

First  Period,    1870  to   1882. 

This  period  begins  with  the  organization  of 
the  Standard  Oil  Company  of  Ohio  in  the  year 


3 

1870  with  a  capital  stock  of  $1,000,000,  to  take 
over  the  businesses  of  Rockefeller  &  Andrews, 
William  Rockefeller  &  Company  and  Rocke- 
feller &  Company,  located  at  Cleveland,  Ohio, 
and  New  York  City.  This  company,  so  it  is 
alleged,  acquired  during  the  years  1871,  1872 
and  1873  all  the  competing  refineries  in  Cleve- 
land, Ohio,  excepting  three  or  four,  the  owners 
of  which  were  forced  to  sell  by  their  inability  to 
compete  with  it  owing  to  the  rebates  and  prefer- 
ential rates  which  it  obtained  from  the  railroad 
companies,  (p.  13). 

The  names  of  a  large  number  of  companies, 
partnerships  and  individuals  engaged  in  the  oil 
business  at  various  times  during  this  period  are 
given,  and  it  is  alleged  that  they  and  others 
formed  associations  and  entered  into  agree- 
ments, combinations  and  conspiracies  between 
themselves,  to  fix  the  price  of  crude  oil, 
and  limit  its  production,  to  fix  the  price 
of  the  products  of  crude  oil  and  limit  their 
production,  and  to  suppress  competition 
and  monopolize  the  trade.  The  only  specific 
instance  mentioned  is  an  agreement  of  Decem- 
ber 1 9th,  1872,  between  two  associations,  one 
known  as  the  Petroleum  Producers  Association 


4 

and  the  other  the  Petroleum  Refiners    Associa- 
tion (p.  1 8).     This  agreement  is  Exhibit  i.  (pp. 


It  is  alleged  that  the  individuals  engaged  in 
the  conspiracy  acquired  during  this  period  by 
the  sale  of  stock  interests  in  the  Standard  Oil 
Company  of  Ohio  interests  in  the  stocks  and 
businesses  of  many  of  the  concerns  previously 
mentioned,  and  through  these  interests  and 
agreements  with  other  refiners  controlled  in  the 
latter  part  of  the  period  more  than  90  per  cent, 
of  the  oil  business,  and  were  enabled  to  do  so 
and  crush  and  limit  competition  by  means  of  re- 
bates and  preferential  rates  obtained  from  rail- 
roads, particularly  the  Pennsylvania  Railroad, 
the  New  York  Central  and  Hudson  River  Rail- 
road, with  its  connection  the  Lake  Shore  and 
Michigan  Southern  Railroad,  the  Erie  Railway, 
with  its  connection  the  Atlantic  and  Great 
Western  Railway,  the  Jersey  Central  Railroad, 
the  Reading,  and  the  Baltimore  and  Ohio.  (pp.  19, 
20,  21). 

Then  follows  a  specification  of  various  con- 
tracts with  railroad  companies  which  are  alleged 
to  have  had  this  effect,  as  follows  : 

(a)  The  organization  of  the  South  Improve- 


ment  Company  in  January,  1872,  and  the  con- 
tract between  it  and  various  railroad  companies, 
(pp.  21-25.  Contract  Exhibit  2,  pp.  198-207). 

(b]  Leases  or  agreements   between   1874  and 
1877  for  the  control  of  the  terminal  facilities  of 
the  various   railroad   companies  for  unloading, 
storing  and   handling   oil   at   Jersey  City,  New 
York,  Baltimore   and  Philadelphia,  (pp.  25-28  ; 
contracts  with  the  Erie  Railway,  Exhibits  3  and 
4,  pp.  208-216  ;  contract  with  the  N.  Y.  C.  &  H. 
R.  R.  Co.  and   the   Lake   Shore   Company,  pp. 
217-219). 

(c)  A  pooling  contract   between   the   railway 
companies  of  October  i,  1874,  with  its  provision 
for  drawbacks  to  refiners  of  crude  oil  and  ship- 
pers of  crude   oil   to   the  seaboard,  (pp.  28-30 ; 
agreement  Exhibit  6,  pp.  220-226). 

(cf)  A  contract  of  October  17, 1877,  between  the 
Pennsylvania  Companies  and  the  Standard  Oil 
Company  whereby  the  Standard  Oil  Company 
agreed  to  arrange  its  shipments  by  the  various 
railroads  to  maintain  their  proportions  of  the 
traffic  as  fixed  by  an  agreement  between  the 
railroad  companies,  and  to  guarantee  a  mini- 
mum of  oil  traffic,  for  which  it  was  to  receive  a 
commission  of  ten  per  cent,  of  the  rates  on  its 


own  shipments.  It  is  alleged  that  there  was  a 
similar  contract  with  the  New  York  Central  and 
Erie  Companies,  (pp.  31,  32  ;  Exhibit  7,  pp. 
227-229). 

(e)  Contracts  between  the  American  Transfer 
Company,  a  pipe  line  company,  and   the  New 
York  Central,  Erie  and  Pennsylvania  Companies, 
whereby  the  railroad  companies  agreed  to  pay 
to  the  Transfer  Company  twenty  cents  a  barrel 
on  all  crude  oil  carried  by  the  railroads,  (pp.  33, 
34  ;  contract  with  Pennsylvania  Company,  Ex- 
hibit  8,  pp.  231-233  ;    contract  with   the   Erie 
Railway  Company,  Exhibit  9,  pp.  234,  235). 

(f)  An  allowance  by   the   railroad  companies 
during  the  years  1877  and  1878  of  an  additional 
fifteen  cents  per  barrel  on  shipments  of  crude  oil 
by  the   Standard   Oil   Company   and   its  allied 
interests,  (p.  35). 

It  is  further  alleged  that  in  1879  separate  suits 
were  brought  by  the  State  of  Pennsylvania 
against  the  Pennsylvania  Railroad  Company 
and  other  railroad  companies,  and  against  the 
United  Pipe  Lines  Company,  to  oust  them  from 
their  franchises  in  Pennsylvania  because  of 
these  contracts  or  some  of  them;  which  suits 
were  adjusted  by  a  contract  between  the  Standard 


Oil  Companies  and  the  Independent  Petroleum 
Producers'  Union,  and  a  contract  between  the 
Union  and  the  Pennsylvania  Railroad  Com- 
pany, (pp.  36-38 ;  Exhibit  10,  pp.  236-241). 

It  is  further  alleged  that  the  parties  to  the 
conspiracy  acquired  during  this  period  in  the 
name  of  the  Standard  Oil  Company  the  owner- 
ship and  control  of  the  principal  pipe  lines  ex- 
tending from  the  oil  regions  of  Pennsylvania 
to  the  various  railroads  over  which  oil  was 
transported  to  the  refineries  at  Philadelphia, 
New  York,  Cleveland  and  other  points,  and  con- 
solidated them  first  into  the  American  Transfer 
Company  and  the  United  Pipe  Lines,  and  later, 
in  the  year  1881,  into  the  National  Transit  Com- 
pany ;  and  that  they  were  thereby  enabled  to  fix 
the  price  of  crude  oil  and  the  price  for  its  trans- 
portation by  pipe  lines  and  railways,  resulting 
in  rate  discriminations  against  their  competitors. 
(PP-  38,  39)- 

Period,  1882  to  1899. 

The  formation  of  the  so-called  Standard  Oil 
trust  is  alleged,  including  the  trust  agreement 
of  January  2d,  1882,  and  the  supplemental 
agreement  of  January  4th,  1882.  (p.  39). 


Referring  to  the  corporations  and  limited  part- 
nerships named  in  the  trust  agreement  it  is 
charged  as  follows  (pp.  54,  55)  : 

"  And  that  each  and  all  of  said  corpora- 
tions and  limited  partnerships  were  at  the 
time  of  the  signing  of  said  agreement,  and 
for  a  long  time  prior  thereto,  so  engaged 
separately  in  said  business  as  such  corpora- 
tions and  limited  partnerships  ;  and  that  by 
the  said  trust  agreement  and  the  placing  of 
said  stock  interests  in  the  hands  of  said  trus- 
tees, as  by  the  said  agreement  provided,  all 
competition  among  the  said  corporations, 
limited  partnerships  and  individuals  was 
suppressed  and  destroyed,  and  the  aforesaid 
trade  and  commerce  among  the  several 
states  and  territories  of  the  United  States, 
the  District  of  Columbia,  and  both  foreign 
nations,  as  above  described,  was  restrained 
and  monopolized." 

The  trustees  organized  as  a  body ;  adopted 
by-laws ;  and  proceeded  pursuant  to  the  trust 
agreement  to  organize  the  Standard  Oil  Com- 
pany of  New  Jersey  and  the  Standard  Oil  Com- 
pany of  New  York.  (pp.  55,  56). 

It  is  further  alleged  as  follows  (pp.  56,  57) : 

"  Your  petitioner  further  alleges  that  pur- 
suant to  said  trust  agreement  the  said  trus- 
tees caused  to  be  transferred  to  themselves 


the  stocks  of  all  corporations  and  limited 
partnerships  named  in  said  trust  agreement, 
and  caused  various  of  the  individuals  and 
co-partnerships  who  owned  independent  re- 
fineries and  other  properties  employed  in  the 
business  of  refining  and  transporting  and 
selling  oil  in  and  among  the  said  various 
states  and  territories  of  the  United  States  as 
aforesaid,  to  transfer  their  property  situated 
in  said  several  states  to  the  respective 
Standard  Oil  Companies  of  said  States  of 
New  York,  New  Jersey,  Pennsylvania  and 
Ohio,  and  other  corporations  organized  or 
acquired  by  said  trustees  from  time  to  time." 

The   trust   certificates   were  in  the  following 
form  (p.  57) : 

"  No.         Shares  $100  each.         Shares 
STANDARD  OIL  TRUST. 

"  This  is  to  certify  that 

is  entitled  to  shares  in  the  equity  to 

the  property  held  by  the  trustees  of  the 
Standard  Oil  trust,  transferable  only  on  the 
books  of  said  trustees  on  surrender  of  this 
certificate.  This  certificate  is  issued  upon 
condition  that  the  holder  or  any  transferee 
thereof  shall  be  subject  to  all  the  provisions  of 
the  agreement  creating  said  trust  and  of  the 
by-laws  adopted  in  pursuance  of  said  trust 
agreement  as  fully  as  if  he  had  signed  the 
said  trust  agreement." 


10 

The  individuals  to  whom  these  certificates 
were  issued  at  the  time  of  the  formation  of  the 
trust  are  given  on  pages  58  and  59. 

It  is  alleged  that  from  time  to  time  during 
this  period  other  properties  belonging  to  concerns 
engaged  in  various  branches  of  the  oil  business 
in  competition  with  the  trust  were  acquired,  and 
their  property  or  stocks  transferred  to  corpora- 
tions owned  or  controlled  by  the  trustees  or  to 
the  trustees,  (p.  59). 

A  list  of  the  corporations  whose  stocks  were 
in  whole  or  in  part  held  by  the  trustees  in  the 
year  1888  is  given  (pp.  60,  61).  Between  that 
time  and  1892  these  various  interests  by  trans- 
fers of  properties  and  stocks  were  vested  in 
twenty  companies,  which  are  named  on  page  62. 

It  is  alleged  that  (p.  63)  : 

"  the  individual  defendants  herein,  being  at 
all  times  a  majority  of  and  in  control  of 
said  board  of  trustees,  .  .  .  controlled 
all  of  said  separate  corporations  through 
said  stock  ownership,  and  elected  boards  of 
directors  and  officers  in  the  said  various 
corporations  from  time  to  time,  and  man- 
aged them  all  in  harmony." 

As  a  result  of  the  judgment  in  a  suit  in  the 
Supreme  Court  of  the  State  of  Ohio,  entitled 


11 

State  of  Ohio,  ex  rel.  Attorney  General  vs. 
Standard  Oil  Company  (of  Ohio)  (49  Ohio  St., 
137),  a  meeting  of  the  trust  certificate  holders 
was  held  on  March  21,  1892,  and  a  resolution 
adopted  terminating  the  trust  agreement  of  Janu- 
ary 2d,  1882,  and  providing  for  the  winding  up 
of  the  trust,  (pp.  63,  64  ;  resolution,  pp.  64,  65). 

The  trust  certificates  issued  at  the  time  of  the 
formation  of  the  trust  amounted  to  $70,000,000. 
At  the  time  of  the  dissolution  they  amounted  to 
$97,250,000 ;  the  additional  certificates  having 
been  issued  for  stock  dividends  and  in  payment 
of  properties  acquired.  The  plan  of  dissolution 
provided  for  issuing  to  each  certificate  holder  on 
the  surrender  of  his  certificates  an  assignment  of 
an  interest  in  the  stocks  held  by  the  trustees  in 
the  proportion  of  the  number  of  his  certificates 
to  the  total  outstanding  certificates,  (p.  66 ; 
Assignment,  p.  67). 

Holders  of  more  than  a  majority  of  the  out- 
standing certificates  surrendered  their  certifi- 
cates, obtained  their  assignments  of  legal  interest, 
and  converted  them  into  shares  of  the  twenty 
companies.  It  is  alleged  that  the  individual  de- 
fendants so  surrendered  their  certificates ;  that 
the  mass  of  certificate  holders  retained  their 


12 

certificates  down  to  the  acquisition  of  the  shares 
of  the  twenty  companies  by  the  Standard  Oil 
Company  (of  New  Jersey)  in  1899  >  an(^  that 
thereby  the  "  individual  defendants  in  this  action, 
who  were  the  liquidating  trustees,  did  continue  to 
manage  the  affairs  of  all  said  separate  corpora- 
tions so  engaged  in  said  business  in  the  same 
manner  as  they  had  theretofore  under  and  by 
virtue  of  the  terms  of  said  trust  agreement ". 

(P.  69). 

Period,    1899  to  the   present  time. 

In  January,  1899,  the  charter  of  the  Standard 
Oil  Company  (of  New  Jersey)  was  amended,  and 
its  capital  stock  increased  from  ten  million  dol- 
lars to  one  hundred  and  ten  millions,  of  which 
the  outstanding  ten  millions  were  declared  to  be 
preferred  stock  and  the  remaining  one  hundred 
millions  common  stock.  Of  the  shares  of  com- 
mon stock  $97,250,000  were  then  issued  in  ex- 
change for  the  shares  of  the  companies  and  lim- 
ited partnerships  which  had  been  held  by  the 
trustees  of  the  trust  (including  the  preferred 
stock  of  the  Standard  Oil  Company  of  New 
Jersey),  and  represented  by  the  $97,250,000  of 
trust  certificates  outstanding  at  the  time 
of  the  dissolution  in  1892.  This,  it  is 


13 

charged,  was  done  by  the  individual  defendants 
for  the  purpose  of  further  carrying  out  the  con- 
spiracy and  effecting  a  monopoly  of  the  oil  busi- 
ness, (pp.  70-74). 

The  names  of  sixty-nine  companies  are  given 
as  the  companies  now  controlled  by  the  de- 
fendants (pp.  75,  76).  Some  of  these  com- 
panies are  described  as  engaged  in  refining ; 
others  in  transporting  crude  oil  through  pipe 
lines ;  others  as  owners  of  tank  cars  and  steam- 
ships for  the  transportation  of  oil ;  and  others  as 
engaged  in  the  marketing  of  oil  throughout  the 
United  States,  (pp.  79-84).  Then  follows  a  gen- 
eral allegation  that  from  1882  to  1899  the  Stand- 
ard Oil  Trust,  and  since  1899,  tne  Standard 
Oil  Company  and  its  subsidiary  corpora- 
tions, have  refined  and  sold  more  than 
ninety  per  cent,  of  the  petroleum  products 
manufactured  and  consumed  in  the  United  States 
and  shipped  to  foreign  countries,  and  have 
monopolized  the  commerce,  traffic,  transporta- 
tion, refining  and  sale  of  oil,  in  the  United  States 
and  foreign  countries,  thereby  restraining  such 
commerce,  regulating  the  production  and  supply 
of  the  products,  and  fixing  the  price  thereof,  (pp. 
84-86). 


14 

The  remainder  of  the  bill  is  devoted  to  a 
statement  of  the  various  means  by  which  this 
monopolization  has  been  effected.  The  head- 
ings of  the  various  subdivisions  sufficiently  in- 
dicate for  our  present  purpose  what  those  means 
as  so  set  forth  are,  and  we  give  them  in  their 
order  as  follows  :  (i)  agreements  with  Tidewater 
Companies  (pp.  86-89 ;  Exhibit  13,  pp.  251- 
260) ;  (2)  contract  with  Pennsylvania  Railroad 
Company  of  August  22,  1884  (pp.  89-92  ;  Ex- 
hibit 14,  pp.  262-268)  ;  (3)  restraint  and 
monopolization  by  control  of  pipe  lines  (pp. 
92-95;  Exhibit  15,  pp.  269-271);  (4)  unfair 
practices  against  competing  pipe  lines  (pp.  97- 
101) ;  (5)  certain  contracts  in  restraint  of  trade 
(pp.  101-108  ;  Exhibit  16,  pp.  272,  273  ;  Ex- 
hibit 17,  pp.  274-276)  ;  (6)  railroad  discrimina- 
tions, instances  of  which  are  given  as  fol- 
lows:  (a)  in  southern  states  (pp.  110-124) ;  (b) 
in  southwestern  territory  (pp.  124-129)  ; 
(c)  rates  from  Kansas  points  (pp.  130-133);  (d) 
failure  to  pro-rate  on  shipments  to  Pacific  Coast 
(pp.  133-134) ;  (*0  failure  to  pro-rate  on  ship- 
ments to  North-West  (pp.  125-137);  (/)  dis- 
criminations in  New  York  and  New  England 
(pp.  134-147);  (g)  discriminations  between 


15 

Parkersburg  and  Marietta  (pp.  147-149) ;  (h)  dis- 
criminations in  California  (pp.  149-153) ;  and  (z) 
discriminations  in  Central  States  (pp.  153-161) ; 
(7)  general  system  of  discrimination  ;  control  of 
railroads  (pp.  162-167)  ;  (8)  monopoly  of  sale  of 
lubricating  oil  to  railroads  (pp.  167-172);  (9) 
unfair  methods  of  competition  consisting  of  (a) 
local  price  cutting  (pp.  173-176);  (b)  reports 
of  competitor  shipments  (pp.  176-178) ;  (c) 
operation  of  bogus  independent  companies  (pp. 
178-181),  and  (d)  payment  of  rebates  on  oil 
prices  (pp.  181-182) ;  and  (10)  division  of  terri- 
tory (p.  185). 

The  bill  closes  with  the  allegation  that  by 
reason  of  the  control  of  the  oil  business  by  the 
Standard  Oil  Trust  and  the  Standard  Oil  Com- 
pany (of  New  Jersey)  the  profits  since  January 
ist,  1882,  have  been  exorbitant  (pp.  182-184). 

This  is  the  case  made  by  the  bill.  Its  essen- 
tial features  are  : 

(1)  A  conspiracy  entered  into  by  certain 
individuals  to  restrain  and  monopolize  the 
oil  business,  dating  back  to  1870  ; 

(2)  A  combination  of  competitive  plants 
and   properties   in    execution    of    the   con- 
spiracy ; 


16 


(3)  The  employment  of  certain  means  and 
agencies     after     the     acquisition    of    the 
properties  to  effect  the  monopoly  ;  and 

(4)  The  actual  present  monopolization  of 
the  business  by  those  means  and  agencies. 


Summary  of  facts  bearing  on  the  alleged 
combination  or  conspiracy  in  restraint  of 
trade. 

(i)  In  1865  Mr.  John  D.  Rockefeller  became 
the  owner  of  a  refinery  in  Cleveland,  with  which 
he  had  been  connected  for  three  or  four  years, 
and  organized  the  firm  of  Rockefeller  &  Andrews 
to  continue  its  business.  Rockefeller  &  Andrews 
in  1866  associated  themselves  with  Mr.  William 
Rockefeller  in  the  formation  of  the  firm  of  Will- 
iam Rockefeller  &  Company,  which  built  another 
refinery  on  property  adjacent  to  the  refinery  of 
Rockefeller  &  Andrews.  In  the  same  year  Mr. 
John  D.  Rockefeller,  Mr.  Andrews  and  Mr.  Will- 
iam Rockefeller  organized  the  firm  of  Rockefeller 
&  Company,  with  headquarters  at  New  York 
City,  "  to  develop  the  sale  of  oil  from  that  point 
and  to  save  for  our  business  the  expenses  of  com- 
mission men  ;  and  by  doing  our  own  warehouse 
business  to  reduce,  if  possible,  to  the  minimum 


17 

of  cost  the  handling  of  the  oil  which  we  ex- 
ported "  (Vol.  1 6,  p.  3054).  The  properties  of 
these  firms  were  in  1867  taken  over  by  the  new 
firm  of  Rockefeller,  Andrews  &  Flagler.  Addi- 
tional capital  was  brought  in  by  Mr.  Flagler 
who  at  that  time  became  a  member  of  the  firm. 
This  firm  had  two  refineries  at  Cleveland  where 
the  mannfacturing  was  done;  a  domestic  trade 
from  Cleveland ;  and  an  export  trade  from  New 
York. 

The  Standard  Oil  Company  of  Ohio  was  or- 
ganized in  1870  by  the  members  of  this  firm  to 
take  over  its  property  and  business.  Its  capital 
was  $1,000,000,  represented  mainly  by  the  prop- 
erty and  business  thus  acquired.  The  balance 
was  new  capital  contributed  by  capitalists  in 
Cleveland  and  New  York  City. 

Mr.  John  D.  Rockefeller,  Mr.  Andrews,  Mr. Wil- 
liam Rockefeller  and  Mr.  Flagler  were  young, 
vigorous  and  able  men.  Mr.  Andrews  was  a  prac- 
tical refiner  and  devoted  himself  particularly  to 
the  manufacturing  branch  of  the  business.  The 
Messrs.  Rockefeller  and  Mr.  Flagler  devoted  them- 
selves particularly  to  its  commercial  and  financial 
interests.  The  firm  of  Rockefeller,  Andrews  & 
Flagler  had  by  its  enterprise,  methods,  zeal 


18 

and  business  capacity  won  for  itself  position, 
standing  and  credit.  The  organization  of  the 
Standard  Oil  Company  of  Ohio,  with  its  in  those 
days  large  capital  of  one  million  dollars,  enabled 
it  with  the  credit  and  confidence  it  commanded 
to  provide  itself  with  the  means  of  conducting  its 
business  on  the  most  advanced,  effective  and 
economical  lines.  It  was  no  doubt  at  that  time 
one  of  the  concerns  in  the  business  best  equipped 
to  cope  with  the  widespread  demoralization  which 
prevailed. 

(2)  The  result  of  the  discovery  of  petroleum 
in  the  northwestern  part  of  Pennsylvania,  of  a  suc- 
cessful method  of  mining  it,  of  the  application  of 
methods  of  refining  it  into  kerosene,  and  of  the 
usefulness  of  the  product  for  illuminating,  heat- 
ing and  lubricating  purposes  was,  during  the 
'60's,  the  multiplication  of  refineries  of  all  sorts 
and  kinds,  and  a  vast  excess  of  refining  capacity 
both  with  respect  to  the  production  of  the  crude 
oil  and  the  demand  for  its  products.  Chaotic 
conditions  prevailed  in  every  branch  of  the  in- 
dustry;— production,  manufacturing  and  trans- 
portation. There  was  a  continual  war  of  con- 
flicting interests  and  a  maximum  of  instability. 


19 

(a)  The  period  of  substantial  production  be- 
gan in  1860  with  a  volume  of  500,000  barrels, 
which  had  increased  in  1865  to  2,500,000,  and  in 
1870  to  over  5,000,000  barrels.  A  vast  number 
of  people  were  drawn  to  the  oil  fields,  the 
earliest  of  which  were  in  Venango  County, 
Pa.,  extending  from  the  south-east  corner  of 
Warren  County  to  Franklin.  Wells  were  sunk 
in  great  numbers  and  a  wild  spirit  of  adventure 
prevailed.  At  the  close  of  the  war  there  was  a 
rush  from  the  disbanding  armies  to  the  oil 
fields.  Many  of  the  wells  that  were  sunk  turned 
out  dry,  others  would  produce  large  quantities 
for  a  short  time,  and  others  had  a  longer  life. 
Many  who  sank  wells  had  but  little  capital  and 
were  compelled  by  their  necessities  to  sell  their 
production  at  whatever  they  could  get  for  it. 
The  facilities  for  storage  and  transportation 
were  to  the  last  degree  meagre.  These  condi- 
tions, intensified  by  the  spirit  of  speculation 
which  they  inevitably  engendered,  produced 
during  those  years  wild  fluctuations  in  the  prices 
of  crude  oil, — prices  which  ranged  from  $20  to 
10  cents  a  barrel.  The  following  table  shows 
the  average  price  of  crude  oil  during  the  years 


20 

from  1860   to   1869  compiled  from    Government 
documents  : 

per  barrel 


1861  

.40 

1862  

1861... 

7.  it: 

1864  . 

8.06 

1865. 

6.^0 

1866  

7.74 

1867.. 

2.41 

1868  

1.62^ 

1860.. 

These  are  yearly  averages  showing  only  the 
differences  year  by  year,  and  not  the  much 
wider  fluctuations  from  month  to  month,  and 
even  from  day  to  day.  In  1860,  for  example, 
the  range  was  from  $20.00  to  $2.00 ;  in  1862 
from  $2.50  to  IQC;  and  in  1864  from  $14.00  to 

$3-75- 

A  manufacturing  business  cannot  be  estab- 
lished on  a  sound  basis  when  its  raw  material  is 
subject  to  such  abnormal  fluctuations. 

(£)  The  crude  oil  had  at  first  to  be  trans- 
ported to  the  railroads  by  wagon.  Later  short 
pipe  lines  were  laid  to  gather  the  oil  at  the  wells, 


21 

which  were  connected  by  other  lines  with  the 
branch  extensions  of  the  various  railroads  as 
they  were  built.  There  was  the  same  disregard 
of  practical  conditions  in  laying  these  pipe  lines 
that  characterized  the  sinking  of  wells.  There 
was  an  unnecessary  multiplication  of  lines  to 
every  locality  where  oil  was  being  found,  and  a 
struggle  to  get  the  business  at  any  price.  Lines 
were  laid  with  insufficient  capital  behind  them  ; 
many  of  them  became  useless  soon  after  they 
were  built  through  the  exhaustion  of  the  wells ; 
and  under  such  conditions  there  could  be  neither 
remunerative  nor  uniform  rates. 

(c)  The  same  conditions  prevailed  in  the  re- 
fining branch  of  the  industry.  At  first  there 
was  a  mushroom  development  of  insignificant 
refineries  at  Oil  City,  Titusville,  other  points 
along  the  Allegheny  River,  Erie,  Pittsburgh, 
Cleveland,  and  the  Atlantic  seaboard.  War 
taxation  crushed  out  many  of  these.  The  con- 
ditions in  other  branches  of  the  industry  which 
have  been  described  were  fatal  to  others.  Im- 
provements in  methods  were  beyond  the  means 
of  those  who  had  little  or  no  capital.  Those 
who  could  find  capital  enlarged  and  improved 
their  refineries  and  established  themselves  on  a 


22 

firmer  basis.  The  removal  of  war  taxation  in 
1868  again  stimulated  construction,  as  did  the 
continually  increasing  volume  of  the  crude  pro- 
duction. The  result  was  a  great  excess  of  refining 
capacity.  In  "  Derricks  Hand-Book  of  Petro- 
leum," Vol.  i,  page  780,  the  daily  refining  ca- 
pacity in  1873  of  all  the  refineries  is  stated  to  be 
47,000  barrels,  which  was  more  than  twice  the 
amount  of  crude  produced.  The  testimony  shows 
that  the  excess  of  refining  capacity  was  much 
greater  before  that  time.  Moreover  the  crude 
production  was  greater  than  the  demand  for  the 
manufactured  products.  This  is  shown  by  the 
fact  that  the  stocks  of  crude  oil  increased  be- 
tween 1871  and  1873  at  the  rate  of  500,000  bar- 
rels a  year,  and  in  1874  the  increase  was  two 
millions  of  barrels.  Obviously,  as  the  same 
authority  observes,  "  Many  of  the  refineries  had 
to  shut  down  part  of  the  time,  or  else  not  oper- 
ated to  their  full  capacity." 

(d]  The  railway  situation  was  equally  compli- 
cated. The  three  trunk  lines  which  competed 
for  oil  traffic  were  the  Pennsylvania  to  the  south 
of  the  oil  fields ;  the  Erie,  with  its  connection 
the  Atlantic  and  Great  Western,  and  the  New 
York  Central  with  its  connection  the  Lake 


23 

Shore  and  Michigan  Southern  Railroad,  to  the 
north.  The  Pennsylvania  Railroad  had  the  most 
advantageous  position.  Its  haul  to  the  seaboard 
from  the  points  where  it  received  the  crude  and 
refined  oil  was  shorter  than  that  of  the  other 
lines,  and  as  the  oil  fields  extended  southerly 
into  Clarion  and  Butler  Counties  from  1869  on  it 
became  shorter  and  shorter.  This  is  apparent 
from  the  fact  that  the  distance  from  Pittsburgh 
to  Philadelphia  is  about  400  miles,  whilst  the 
haul  on  the  Erie  and  its  connection  from  Oil 
City  to  New  York  was  550  miles,  and  the  haul 
on  the  Lake  Shore  and  New  York  Central  Rail- 
roads from  Cleveland  to  New  York  was  740 
miles.  In  the  later  6o's  and  the  early  yo's  the 
struggle  of  these  railway  systems  for  traffic  as 
they  were  extended  westward  is  a  matter  of 
history.  It  affected  every  kind  of  traffic. 
Agreements  were  made  from  time  to  time 
to  maintain  rates,  but  were  short-lived. 
Every  railroad  company  protected  the 
industries  on  its  own  line  with  special  rates,  and 
special  efforts  were  made  for  particular  kinds  of 
traffic  of  growing  importance.  It  was  an  era  of 
each  road  getting  all  the  business  it  could  by 
offering  the  rates  that  would  get  it.  The  oil 


24 

traffic  was  no  exception.  The  Pennsylvania 
Railroad  naturally  felt  itself  entitled  to  the 
major  part  of  the  traffic  because  of  its  proximity 
to  most  of  the  refining  points  and  its  shorter 
line  to  the  seaboard.  The  New  York  Central 
and  Erie  were  bound  to  get  all  they  could 
and  took  whatever  measures  were  necessary 
to  that  end.  The  effort  of  the  Pennsylvania 
was  to  control  the  transportation  of  crude  oil 
from  the  oil  regions,  and  the  refined  oil  from  the 
refineries  in  that  locality  and  Pittsburg.  In  the 
language  of  the  day,  "  Cleveland  was  to  be  wiped 
out  as  a  refining  centre."  The  effort  of  the 
New  York  Central  was  to  protect  and  develop 
Cleveland  as  a  refining  center.  The  effort  of  the 
Erie  was  to  get  a  fair  share  of  the  business  from 
the  oil  fields  and  the  refineries  in  the  oil  regions. 
The  situation  was  further  complicated  by  the 
fact  of  water  transportation  to  New  York  via 
Lake  Erie  and  the  Erie  Canal. 

(e)  These  were  the  conditions  which  existed 
during  the  period  mentioned.  There  was  demor- 
alization in  every  branch  of  the  business  ;  in 
production,  in  refining,  in  local  pipe  line  trans- 
portation, and  in  railroad  transportation.  Every 
branch  of  the  business  was  in  an  abnormal  state. 


25 

There  was  no  certainty  or  stability  in  any  part 
of  it.  There  was  a  deadly  struggle  at  every 
point,  and  the  oil  business  was  threatened  with 
ruin. 

(3)  Farseeing  and  conservative  men  sought  for 
a  cure  for  this  disastrous  condition  of  affairs. 
Those  who  would  naturally  lead  the  way  were 
the  railroad  companies  and  the  larger  refiners. 
The  plan  of  the  South  Improvement  Company 
was  evolved  for  this  purpose  late  in  1871  and  the 
beginning  of  1872.  Its  object  was  to  co-ordinate 
the  various  branches  of  the  industry  ;  to  bring 
together  the  producer,  the  refiner  and  the  rail- 
road ;  to  adjust  their  relations  so  as  to  secure  for 
the  producer  a  fair  and  adequate  remuneration 
for  his  product,  to  assure  the  refiner  his  sup- 
ply at  a  reasonable  and  normal  price  and  equal 
railroad  rates,  and  to  secure  for  the  railroads 
fair  and  remunerative  rates  for  the  trans- 
portation of  the  oil.  It  originated  with  the 
railroads  and  some  of  the  leading  refiners  in 
Pittsburgh  and  Philadelphia.  The  Standard 
Oil  Company  had  no  faith  in  its  practicability, 
but  gave  its  passive  support  that  it  might  not 
be  charged  with  blocking  an  effort  to  ameliorate 


26 

the  conditions  of  the  business.  The  plan  failed 
and  never  went  into  operation.  It  is  not  neces- 
sary here  to  discuss  it  more  in  detail.  Its  his- 
tory has  been  written  from  different  points  of 
view,  as  will  be  seen  by  a  reference  to  Miss 
TarbelPs  book  and  "  The  History  of  the 
South  Improvement  Company,"  by  Dr.  Leonard 
Woolsey  Bacon.  The  version  of  the  parties 
who  promoted  it  is  found  in  the  circular 
which  was  issued  at  the  time  (Vol.  6,  p.  2619). 
Mr.  John  D.  Rockefeller's  version  of  it  and  of  the 
relations  to  it  of  the  Standard  Oil  Company  is 
found  in  Vol.  16,  pp.  3068-3071.  That  the  rela- 
tion of  the  Standard  Oil  Company  to  it  was  a 
passive  one  is  also  shown  by  the  testimony  of 
Mr.  Flagler  before  a  Committee  of  the  House  of 
Representatives  in  the  year  1888.  (Report  of 
Committee  on  Manufactures  of  the  House  of  Rep- 
resentatives, 1888,  p.  289). 

(4)  It  is  apparent  that  in  the  early  seventies 
the  position  of  the  Standard  Oil  Company  of 
Ohio  and  the  other  refiners  at  Cleveland  was  a 
serious  one.  There  was  not  only  the  general 
demoralization  of  the  business  and  the  excess  of 
refining  capacity  at  that  and  every  other  refining 


27 

point,  but  the  adverse  attitude  of  the  Penn- 
sylvania Railroad  to  Cleveland  as  a  refining 
centre  and  its  relative  disadvantage  with  ref- 
erence to  the  crude  oil  production  as  the 
oil  fields  extended  south  into  Marion  and 
Butler  counties,  and  to  the  export  business 
because  of  its  distance  from  the  Atlantic  sea- 
board. Moreover  in  the  excitement  aroused 
by  the  South  Improvement  Company  a  boycott 
was  maintained  against  the  Standard  Oil  Com- 
pany to  deprive  it  of  its  supply  of  crude  oil. 
The  facts  in  its  favor  were  that  it  was  then  a 
large  and  important  concern  of  the  most  modern 
type,  equipped  with  the  best  appliances,  and 
owned  and  managed  by  able  men  in  good  credit, 
who  had  faith  in  the  business  and  the  courage  of 
their  faith.  They  felt  that  to  maintain  their 
ground  it  was  necessary  to  increase  and  ex- 
pand their  business,  as  their  strength  and 
power  of  self  preservation  would  grow  with  its 
volume.  Therefore  in  the  latter  part  of  1871 
negotiations  took  place  between  them  and  va_ 
rious  refiners  in  Cleveland,  which  were  then 
and  during  the  year  1872  consummated  by  the 
purchase  of  their  refineries.  The  capital 
stock  of  the  Standard  Oil  Company  of  Ohio 


was  increased  from  one  to  two  millions  and 
a  half  of  dollars.  The  purchases  were  made 
for  cash  or  with  the  stock  of  the  Company  as 
the  vendors  might  elect.  The  transactions  were 
entirely  voluntary,  and  the  charge  that  the  sale 
of  these  refineries  was  coerced  in  any  way,  or 
that  their  owners  were  driven  out  of  the  busi- 
ness, is  unsupported  by  any  evidence.  On  the 
contrary  many  of  them  were  glad  to  convert  their 
investments  into  cash  because  of  the  prevailing 
conditions.  Others  who  took  stock  in  pay- 
ment lost  their  confidence  and  sold  it.  On  the 
other  hand  so  far  from  being  a  conspiracy  to 
monopolize  the  oil  trade  it  was  actually  and  ob- 
viously a  measure  of  self-preservation.  The  ob- 
ject of  the  Standard  Oil  Company  was  to  fortify 
itself  by  an  increase  of  its  business.  Had  it  not 
done  so  it  is  very  questionable  whether  Cleve- 
land could  have  continued  a  refining  centre,  as 
it  was  generally  recognized  that  the  entire  in- 
vestment in  the  oil  business  there  was  at  stake. 

Having  by  these  acquisitions  increased  its  re- 
fining capacity  the  next  step  was  to  increase  its 
markets  and  marketing  facilities.  This  it  did 
with  respect  to  the  export  business  by  the  pur- 
chase in  1873  of  the  plant  of  the  Long  Island 


29 

Refining  Company  in  New  York  harbor,  which 
furnished  it  with  extensive  dock  and  warehouse- 
ing  facilities,  and  the  purchase  of  the  business 
of  the  DeVoe  Manufacturing  Company,  which 
had  a  large  trade  in  Europe  and  the  Orient 
in  the  sale  of  refined  oils  in  cans,  besides 
being  a  manufacturer  of  the  cans.  To  extend 
its  domestic  trade  it  purchased  at  the  same  time 
an  interest  in  the  firm  of  Chess,  Carley  &  Co. 
of  Louisville,  Kentucky,  which  had  a  large 
marketing  business  in  the  south  and  southwest. 

(5)  Even  at  this  distance  of  time  it  is  not  diffi- 
cult to  reconstruct  what  was  bound  to  be  the 
normal  development  of  the  oil  business  in  view 
of  the  existing  conditions.  First  and  foremost 
the  development  of  the  use  of  petroleum  products 
in  this  and  foreign  countries  was  necessary.  That 
involved  a  continuous  extension  and  multiplica- 
tion of  marketing  facilities.  Refining  was  a  pro- 
gressive art,  having  as  its  end  and  aim  the  perfec- 
tion of  the  products,  economy  in  methods  and 
processes,  and  the  utilization  of  the  waste  material 
in  by-products.  The  multiplication  of  refining 
points  was  necessary  to  reach  the  different  parts 
of  the  country  with  a  minimum  of  unnecessary 


30 

transportation.  The  seaboard  was  the  natural 
locality  to  refine  for  export  purposes,  and  differ- 
ent regions  of  the  country  could  be  supplied  from 
particular  interior  refining  points  with  the  mini- 
mum of  transportation.  It  was  necessary  for  a 
regular  and  adequate  supply  of  crude  oil  at  nor- 
mal prices  that  there  should  be  adequate  systems 
of  pipe  lines  to  gather  it  at  the  wells  and  carry 
it  to  the  various  railroad  points,  and  tankage 
systems  for  the  storage  of  the  oil  whenever  the 
production  exceeded  the  demands  of  the  trade. 
And  it  was  only  a  matter  of  time  when  the  rail- 
road and  ocean  transportation  of  oil  in  barrels 
would  be  superseded  by  a  special  kind  of  car  and 
a  special  kind  of  vessel,  such  as  the  tank  car  and 
tank  steamer  of  later  times. 

The  development  of  the  industry  along  these 
lines  would  inevitably  substitute  organization  for 
chaos  in  each  of  its  branches,  and  favor  the  sur- 
vival of  the  fittest.  The  tendency  would  be  from 
instability  to  stability.  That  was  the  natural 
order  of  things  and  there  was  no  escape  from  it. 
Without  concentration  there  was  only  the 
promise  of  destruction.  The  progressive  refiner 
must  enlarge  his  sphere  of  operations  ;  reduce 
the  costs  of  his  business  to  the  lowest  point ; 


31 

extend  his  markets  in  every  direction ;  and  co- 
operate with  other  interests  to  establish  normal 
conditions.  This  would  require  intelligence, 
enterprise,  courage  and  capital.  It  meant,  too, 
that  the  man  or  men  incapable  of  such  an  effort 
for  whatever  reason  must  fall  behind,  or  out  of 
the  race  altogether.  Organization  is  the  basis  of 
all  success  in  the  struggle  for  existence  in  the 
industrial  world,  and  particularly  when  there  are 
inter-dependent  branches  of  an  industry  which 
are  only  fruitful  in  co-operation.  If  to 
organize,  extend  and  develop  an  industry 
is  a  criminal  conspiracy  then  all  great 
enterprises  are  conspiracies  in  their  conception 
and  origin.  Such  a  view  of  the  matter  is 
purely  artificial,  and  unworthy  of  serious  con- 
sideration. We  may  therefore  assume  that  the 
men  who  constituted  the  Standard  Oil  Co.  of 
Ohio  early  saw  that  organization,  expansion  and 
development  were  essential  to  the  existence  and 
progress  of  the  Company  and  its  business  ;  that 
they  moved  in  that  direction  as  their  means 
permitted  and  the  opportunity  offered  ;  and  that 
to  do  so  was  a  natural  course  and  not  a  con- 
spiracy. 


32 

(6)  In  1872,  as  we  have  seen,  the  Company 
was  established  on  a  large  scale  as  a  refiner  in 
Cleveland  and  had  extended  its  marketing  fa- 
cilities in  various  directions.  The  next  step  for 
its  owners  was  to  establish  themselves  as  refiners 
in  the  oil  regions  for  the  obvious  advantages  of 
that  situation.  It  was  the  vicinity  of  the  crude 
oil  production,  and  if,  in  the  turn  of  events,  it 
excelled  as  a  refining  locality  to  the  point  of 
supremacy  they  would  be  there  for  the  protection 
of  their  interests  and  business.  Early  in  1874 
they  acquired  the  Imperial  Oil  Refinery,  at  Oil 
City,  a  large  modern  refinery  situated  on  the 
Allegheny  River.  In  the  latter  part  of  1874 
or  the  beginning  of  1875,  to  establish  them- 
selves at  other  points  which  had  special  advant- 
ages, they  acquired  refineries  at  Philadelphia, 
including  the  refinery  of  the  Atlantic  Refining 
Company,  and  refineries  at  Pittsburgh,  includ- 
ing the  refinery  of  the  Standard  Oil  Company 
of  Pittsburgh,  a  separate  and  distinct  concern. 
About  the  same  time  they  purchased  the  re- 
finery and  business  of  Charles  Pratt  &  Company 
on  the  Brooklyn  side  of  the  East  River,  and 
thereby  acquired  additional  refining  facilities  at 
the  seaboard,  increased  dock  properties  and  ware- 


33 

housing  facilities,  and  a  large  domestic  and  Ori- 
ental trade.  It  was  at  this  time,  and  no  doubt  to 
enable  them  to  make  the  purchase  of  the  Charles 
Pratt  &  Company,  Philadelphia  and  Pittsburgh 
properties,  that  the  capital  stock  of  the  Standard 
Oil  Company  of  Ohio  was  increased  from  two 
millions  and  a  half  to  three  millions  and  a  half 
of  dollars — its  last  increase.  The  value  of  the 
property  obtained  through  these  acquisitions 
was  three  millions  of  dollars  (Vol.  16,  p.  3082). 

In  1875  the  refineries  of  Porter,  Moreland  & 
Co.  and  Bennett,  Warner  &  Co.  at  Titusville 
were  acquired  to  strengthen  their  position  as 
refiners  in  the  oil  regions.  In  1876  and 
1877  they  acquired  a  majority  interest  in  the 
refinery  and  business  of  J.  N.  Camden  &  Co. 
at  Parkersburg,  West  Virginia,  which  were 
vested  in  the  Camden  Consolidated  Oil  Co.,  or- 
ganized by  them  for  that  purpose ;  a  number  of 
refineries  in  Baltimore,  which  were  vested  in  the 
Baltimore  United  Oil  Co.,  organized  by  them  for 
that  purpose ;  and  a  refinery  on  a  small  scale  in  Bos- 
ton, Mass.,  with  a  New  England  trade  which  they 
organized  as  the  Maverick  Oil  Co.  In  1877,  they 
acquired  from  the  Producers  Consolidated  Land 
and  Petroleum  Co.  a  small  refinery  at  Bayonne, 


34 

New  Jersey,  and  some  land  at  Communipaw  on 
which  they  shortly  after  constructed  the  refinery 
known  as  the  Eagle  Works. 

(7)  Between  1870,  when  the  Standard  Oil  Co. 
of  Ohio  was  organized,  and  1877  the  production 
of  crude  oil  had  increased  from  5,000,000  bar- 
rels to  13,000,000,  the  yearly  product  being  as 
follows,  in  round  figures  :  in  1870,  5,200,000  ; 

1871,  5,200,000;  1872,  6,300,000;  1873,9,900,- 
ooo ;  1874,10,000,000;  1875,  8,800,000;    1876, 
9,000,000;   and  1877,   13,000,000.     (Deft.'s  Ex. 
265,  Vol.  19,  p.  624.)     During  the   same   years 
the   stocks   of   crude   oil    in    storage    had     in- 
creased    from    537,000     barrels    to     3,127,000 
barrels,      as       follows,      in      round      figures  : 
I87°>        537>oo°       barrels  ;      1871,      532,000  ; 

1872,  1,084,000  ;  1873,  1,625,000  ;  1874,  3,705,- 
ooo  ;  1875,   3,550,000  ;  1876,    2,551,000  ;  1877, 
3,127,000   barrels.     It   is   clear,   therefore,  com- 
paring the  yearly  production  during  these  years 
with  the  yearly  stocks,  that  though  there  was  a 
great  increase  in   the  manufactured  products  it 
was  not  equal  to  the  supply  of  crude  oil,  and  that 
the  great  need  was  an  increase  of  the  consumption 
and  more  markets.  This  was  theparticular  direc- 


35 

tion  that  the  efforts  of  the  Standard  Oil  Co.  took 
during  these  years.  It  extended  its  own  mar- 
keting stations  through  various  States,  among 
them  Indiana,  Illinois,  Michigan,  Wisconsin 
and  Minnesota.  The  men  interested  in  it 
organized  The  Consolidated  Tank  Line  which 
took  over  and  extended  the  marketing  business 
of  Alexander-McDonald  &  Co.  in  the  southern 
part  of  Ohio,  Indiana  and  Illinois,  and  west  of 
the  Mississippi,  with  headquarters  at  Cincinnati, 
their  interest  in  the  Company  being  a  half. 
They  also  acquired  an  interest  in  the  Waters- 
Pierce  Oil  Co.  which  had  a  marketing  business 
in  Missouri  and  the  southwest.  They  organized 
the  Beacon  Oil  Company,  which  took  over  the 
marketing  business  of  Kidder,  Vaughan  &  Co. 
in  New  England,  and  acquired  a  large  interest  in 
the  marketing  business  of  the  Portland  Kerosene 
Oil  Company,  located  at  Portland,  Maine. 

They  extended  their  operations  to  the  manu- 
facture and  sale  of  lubricating  oils  in  1877  and 
1878  by  acquiring  the  lubricating  plants  of 
the  American  Lubricating  Oil  Co.  in  Cleveland, 
of  the  Mica  Axle  Grease  Co.  in  Pittsburgh,  of 
the  Payne,  Ablett  Co.  near  Pittsburgh,  of  the 
Eclipse  Lubricating  Oil  Co.  at  Franklin,  and  an 


36 

interest  in  the  Galena  Oil  Works  and  Signal 
Oil  Works,  which  were  associated  enterprises 
engaged  in  the  manufacture  of  lubricating  oils 
at  Franklin,  Pa.  This  extension  of  their  busi- 
ness enabled  them  not  only  to  extend  the  market 
for  lubricating  oils,  but  to  utilize  the  residuum 
at  their  various  refineries  remaining  after  the 
production  of  refined  oil  for  illuminating  pur- 
poses, as  it  is  that  residuum  which  is  used  in 
the  manufacture  of  lubricating  oil.  By  these 
various  acquisitions  they  increased  not  only 
their  refining  capacity  to  meet  the  increase  in 
the  production  of  crude  oil,  but  also  the  markets 
for  the  various  manufactured  products. 

(8)  These,  with  the  exception  of  the  purchase 
from  the  Empire  Transportation  Co.  to  be  men- 
tioned later,  are  the  principal  refinery  and  mar- 
keting acquisitions  in  the  years  from  1872  to 
1879.  They  were  all  separate,  distinct  and  in- 
dependent transactions  occurring  at  different 
times  over  this  period  of  years.  Each  purchase 
was  the  result  of  a  voluntary  negotiation  between 
the  particular  vendor  and  vendee.  There  was 
no  combination  between  the  several  vendors,  or 
any  relation  of  any  kind  between  the  different 


37 

transactions.  Every  feature  is  lacking  of  a  com- 
bined mass  of  transfers,  in  which  the  consumma- 
tion of  each  would  have  been  dependent  upon  the 
consummation  of  all.  There  was  no  scheme  for 
these  acquisitions  as  a  whole,  and  no  coercion. 

It  is  probable  that  the  purchase  price  of  the 
Charles  Pratt  &  Co.  business  and  the  Pittsburgh 
and  Philadelphia  refineries  acquired  at  the  be- 
ginning of  1875,  was  paid  in  shares  of  the 
Standard  Oil  Co.  of  Ohio,  because  at  that 
time  occurred  the  last  increase  of  its  capital 
stock  from  two  millions  and  a  half  to  three 
millions  and  a  half  of  dollars.  In  the  other  in- 
stances the  purchase  price  was  largely  paid  in  cash. 
The  usual  course  was  either  to  pay  in  cash  or  to 
organize  a  corporation  to  take  over  the  property 
purchased,  such  of  the  vendors  as  wished  to  be 
paid  in  stock  of  the  purchasing  company  taking 
its  stock,  and  such  of  them  as  wished  to  be  paid  in 
cash  receiving  it  from  the  proceeds  of  the  shares  of 
the  new  company  subscribed  and  paid  for  by  per- 
sons interested  in  the  Standard  Oil  Co.  of  Ohio, 
and  acting  for  the  stockholders  of  that  Company, 
for  that  purpose  and  to  provide  the  necessary  ad- 
ditional capital.  It  may  be  mentioned  here  that 
there  is  no  evidence  that  any  of  the  vendors 


38 

were  in  any  way  restricted  from  engaging  or  em- 
ploy ing  their  capital  in  the  business  in  the  future, 
or  of  any  restrictions  of  any  kind  being  placed 
upon  them  in  that  or  any  other  regard. 

(9)  Pipe  line  acquisitions. 

The  conditions  which  prevailed  in  the  earliest 
years  have  already  been  mentioned  in  a  general 
way.  The  first  stage  was  the  building  of  gather- 
ing lines  by  many  different  people  without  re- 
gard to  whether  there  were  already  sufficient 
pipe  line  facilities  or  not.  Wherever  oil  was 
discovered  and  wells  sunk  more  lines  were  laid 
than  were  necessary.  This  was  followed  by  rate- 
cutting,  loss,  general  demoralization  and,  in 
many  instances,  insolvency.  But  a  prompt, 
adequate  and  orderly  service  was  indispensable 
both  to  producers  and  refiners.  It  was  also 
essential  that  the  business  should  be  remunera- 
tive to  attract  capital  to  provide  adequate  service 
and  facilities  for  new  oil  territories  as  they  were 
discovered,  and  to  provide  tankage  for  the  storage 
of  the  surplus  when  the  production  exceeded 
the  demand.  The  pipe  line  situation  must  ob- 
viously have  been  a  matter  of  deep  concern  to 
a  large  refiner  as  it  affected  the  supply  of  the 
raw  material  of  his  business.  This  was  brought 


39 

home  to  the  Standard  Oil  Company  in  1872  by 
the  embargo  placed  on  its  supply  as  an  incident 
of  the  excitement  over  the  South  Improvement 
Company.  It  could  not  remain  subject  to  similar 
movements  that  might  be  inaugurated  at  any 
time.  The  producers  numbered  many  thousands, 
and  they  were  an  unwieldy,  excitable  mass,  who 
never  could  nor  did  maintain  steady  measures  for 
the  conservation  of  their  business.  There  was 
no  reason  why  they  should  not  have  organized 
an  adequate  pipe  line  and  storage  service,  but 
they  never  did  so.  It  was  absolutely  neces- 
sary that  the  Company  should  establish  such 
a  relation  with  pipe  lines  that  its  supply 
would  be  assured.  There  was  therefore  acquired 
in  the  year  1873  a  third  interest  in  the  firm  of 
Vandergrift  &  Forman,  which  then  owned  cer- 
tain lines  known  as  the  United  Pipe  Lines,  and 
the  capital  stock  of  the  American  Transfer  Com- 
pany, which  owned  another  system  of  lines. 
Referring  to  Petitioner's  Exhibit  770  (Vol.  10, 
p.  1817)  it  appears  that  on  September  4th,  1874, 
there  were  at  any  rate  nine  of  those  pipe  line 
systems.  The  recital  in  that  exhibit  clearly 
reveals  the  conditions  which  had  existed.  It  is 
as  follows : 


40 

"  WHEREAS  the  pipe  lines  owned  and 
controlled  by  the  parties  hereto  have  a  joint 
capacity  for  transportation  more  than  twice 
as  great  as  the  total  volume  of  petroleum 
produced  in  the  district  traversed  by  said 
lines ;  and  whereas  the  separate  and  dis- 
cordant relations  now  prevailing  among  the 
parties  hereto  lead  to  a  needless  multiplica- 
tion of  extensions,  branches  and  other 
matters  involving  a  heavy  cost,  which  ulti- 
mately becomes  in  some  shape  a  charge  upon 
the  business  transported,  and  also  leads  to 
the  offering  of  open  or  secret  inducements 
of  an  illegitimate  nature,  such  as  rebates, 
special  rates,  selling  oil  for  less  than  it  costs 
and  full  pipeage  rates,  and  in  other  ways 
thereby  to  attract  an  under  (?  "  undue  ") 
share  of  traffic  to  the  respective  lines  repre- 
sented herein  ;  and  whereas  it  is  believed  to 
be  desirable  both  for  the  interests  of  the 
parties  hereto  and  those  of  the  public  whom 
they  serve  that  all  needless  expenditure  and 
all  illegitimate  inducements  should  cease  ; 
now  therefore  for  those  purposes  and  for 
other  valuable  considerations  mutually  mov- 
ing the  parties  hereto  they  do  each  respect- 
ively agree  with  each  other  as  follows  :  " 

This  exhibit  is  a  pooling  agreement,  common 
at  that  time  with  transportation  companies,  fix- 
ing a  uniform  rate  of  pipeage,  providing  for  the 
payment  of  the  earnings  of  the  various  systems 


41 

into  a  common  fund,  and  fixing  the  proportion 
of  the  fund  to  which  each  system  should  be 
entitled.  It  appears  from  the  loth  article  that 
the  United  Pipe  Lines  above  mentioned  were  to 
be  entitled  to  29^  per  cent,  of  the  common 
fund,  and  the  American  Transfer  Company  7 
per  cent.,  which  shows  the  extent  of  the  Stand- 
ard's pipe  line  interests  at  that  time. 

In  1877  the  United  Pipe  Lines  and  some  of  the 
other  systems  mentioned  in  Exhibit  770  were  or- 
ganized into  a  corporation,  named  the  United  Pipe 
Lines,  and  a  part  of  the  lines  of  the  American 
Transfer  Company  were  transfered  to  it,  to  vest 
the  gathering  systems  in  the  new  company,  and 
the  longer  lines,  more  in  the  nature  of  trunk  lines, 
connecting  the  gathering  systems  with  the  rail- 
roads, in  the  American  Transfer  Company.  In  that 
year  the  pipe  lines  of  the  Empire  Transportation 
Company  were  acquired  in  the  interest  of  the  own- 
ers of  the  Standard  Oil  Company  through  the 
transaction  to  be  mentioned  later,  and  became  a 
part  of  the  United  Pipe  Line  system,  thereby  in- 
creasing their  interest  in  that  company.  In  1881, 
the  National  Transit  Company  was  organized  by 
the  men  interested  in  the  Standard  and  others  to 
take  over  all  the  lines  of  the  United  Pipe  Lines 


42 

and  the  American  Transfer  Company,  including 
the  trunk  lines  from  the  oil  regions  to  Cleve- 
land, to  Buffalo  and  to  the  seaboard,  which  were 
in  process  of  construction.  In  1882  the  gather- 
ing lines  of  the  National  Transit  Company 
amounted  to  2,468  miles  and  the  trunk  lines  to 
1,062  miles,  a  total  of  3,530  miles.  In  1908  the 
total  mileage  of  the  Standard's  gathering  lines 
was  45,227  miles  and  its  trunk  lines  9,388 
miles,  a  total  of  54,615  miles,  the  difference, 
with  the  exception  of  less  than  a  thousand  miles 
representing  construction  by  the  company,  or  its 
subsidiary  companies  at  its  instance  and  with 
the  capital  it  provided.  (Archbold,  Vol.  17,  p. 
3232 ;  Defts.  Ex.  261,  Vol.  19,  p.  621). 

A  glance  at  Defendant's  Exhibit  265  (Vol.  19, 
P.  624)  shows  what  the  demand  for  capital  out- 
lay in  the  construction  of  pipe  lines  and  storage 
facilities  must  have  been  between  1874  and  1882. 
The  production  increased  from  10,000,000  bar- 
rels in  1874  to  30,000,000  in  1882,  or  to  treble 
the  amount ;  and  during  that  time  it  extended 
into  Vest  Virginia.  The  volume  of  Industrial 
Statistics  for  1892  issued  by  the  Secretary  of 
Internal  Affairs  of  the  State  of  Pennsylvania, 
shows  that  the  stocks  of  crude  oil  increased  from 


43 

3,700,000  barrels  in  1874  to  34,596,000  in  1882. 
The  tankage  to  store  this  vast  increase  was 
enormous  in  its  quantity  and  had  to  be  pro- 
vided. It  was  the  ability  to  provide  by  the 
outlay  of  many  millions  of  dollars  all  this 
necessary  new  construction  of  pipe  lines  and 
tankage  which  accounts  for  the  expansion  of  the 
Standard's  pipe  line  interests  during  those  years, 
as  no  other  interest  cared  to  run  the  risks  of  such 
an  investment. 

It  is  scarcely  necessary  at  this  day  to  elab- 
orate the  fact  that  the  ownership  of  an 
adequate  pipe  line  system,  with  its  necessary 
storage  facilities,  is  an  indispensable  adjunct  to 
refining  on  a  large  scale.  It  is  the  pipes 
that  are  in  contact  with  the  wells,  and  by  their 
means  only  is  the  refiner  enabled  to  provide 
his  supply  at  the  wells  and  regulate  its  storage 
and  transportation  according  to  the  needs  of 
his  refineries.  To  be  dependent  upon  others 
for  that  storage  and  transportation  would 
introduce  an  element  of  uncertainty  entirely 
incompatible  with  the  successful  prosecution 
of  the  business.  This  was  demonstrated  by 
the  early  conditions  in  the  history  of  the  business, 
and  all  subsequent  experience  has  confirmed  it.  It 


44 

is  established  beyond  dispute  by  the  fact  that  all 
the  present  large  and  important  refining  interests, 
which  have  no  connection  with  the  Standard  Oil 
Company,  such  as  the  Pure  Oil  Company,  the 
Gulf  Refining  Company,  the  Texas  Company,  the 
National  Refining  Company  of  Cleveland  and 
the  Union  Oil  Company  of  California  have  found 
it  necessary  to  have  their  pipe  line  systems  (Re- 
port of  Commissioner  of  Corporations  on  Petrol- 
eum Industry,  August  5,  1907,  Part  2,  p.  637). 
This  is  also  true  of  Crew,  Levick  &  Co.  (Rec., 
vol.  20,  p.  107.)  For  the  same  reasons  the  owners 
of  the  Standard  Oil  Co.  acquired  their  pipe  line 
interests  between  1873  and  1881.  Since  that 
time,  as  has  already  been  stated,  the  expansion 
of  the  system  with  the  exception  of  less  than  a 
thousand  miles,  has  been  due  to  new  construc- 
tion to  reach  the  new  oil  fields  in  Ohio,  Indiana, 
Illinois,  Kansas,  Missouri,  Indian  Territory  and 
Oklahoma  as  they  were  discovered  and  provide 
the  necessary  storage  facilities. 

(9)  Reference  has  been  made  to  the  Empire 
Transportation  Company  in  connection  with  the 
acquisition  of  refineries  and  pipe  lines,  and  we 
will  now  take  up  that  transaction.  The  Penn- 


45 

sylvania  Railroad  always  felt  that  it  had  a  prior 
claim  on  the  transportation  of  oil  because  of  its 
proximity  to  the  oil  fields.  It  was  the  first  com- 
pany to  give  special  attention  to  it  by  organizing 
the  Empire  Transportation  Company  to  furnish 
with  its  tank  cars  a  service  exclusively  devoted 
to  the  transportation  of  oil.  At  an  early  day  the 
Empire  Company,  to  further  control  the  traffic, 
acquired  and  established  pipe  line  systems  of  its 
own.  Its  next  step  was  to  acquire  and  operate 
refineries  and  engage  in  the  business  of  refining 
oil.  It  acquired  the  ownership  or  control  of  the 
Sone  &  Fleming  Refinery  at  Brooklyn ;  built  a 
refinery  at  Philadelphia ;  and  through  a  subsidi- 
ary company,  the  National  Storage  Company, 
acquired  property  for  the  same  purpose  at  Com- 
munipaw,  New  Jersey.  This  connection  of  the 
Pennsylvania  Railroad  with  the  business  of 
refining  oil  aroused  great  antagonism  in  the 
latter  part  of  1876  and  the  beginning  of  1877, 
particularly  on  the  part  of  its  rivals,  the  New 
York  Central  and  Erie  companies,  though  the 
Standard  Oil  Company  joined  in  it.  It  was 
charged  that  through  this  alliance  of  the  Rail- 
road Company  with  the  pipe  line  systems  and 
refining  interests  of  the  Empire  Transportation 


46 

Company  it  could  control  not  only  the  trans- 
portation of  oil  as  against  rival  railroads,  but  also 
the  refining  of  oil  as  against  rival  refiners,  by 
merging  its  transportation  charges  in  the  re- 
fining profits.  This  led  to  a  bitter  war  between 
the  railroads,  in  which  the  Standard  Oil  Com- 
pany participated.  It  withdrew  its  oil  traffic 
from  the  Pennsylvania  Railroad  ;  both  pipe  line 
and  railroad  rates  were  cut;  and  every  incident  of 
such  a  war  was  in  full  play  for  some  time.  This 
state  of  affairs  continued  during  most  of  the 
year  1877.  Finally  the  demoralization  became 
so  extreme  that  an  adjustment  was  reached 
whereby  the  Empire  Transportation  Company 
sold  its  refineries  and  pipe  lines  to  the  Standard 
interests  and  its  tank  cars  to  the  Pennsylvania 
Railroad.  This  war  is  fully  described  both  by 
Mr.  Rockefeller  in  his  testimony  and  by  Mr. 
Cassatt  in  testimony  which  he  gave  in  a  case  in 
1879,  and  which  the  Petitioner  has  made  a  part  of 
the  record.  It  was  in  this  way  that  the  Standard 
interests  came  to  acquire  in  October,  1877,  the 
Sone  &  Fleming  refinery  at  Brooklyn  and  the 
Philadelphia  refinery  of  the  Empire  Transporta- 
tion Company,  and  its  pipe  line  system  which  was 
transferred  either  to  the  United  Pipe  Lines  or 


47 

the  American  Transfer  Company.  It  was  a 
separate  transaction  with  its  own  features  and 
conditions,  and  followed  as  a  consequence  of  the 
Pennsylvania  Railroad  Company  participating 
in  the  business  of  refining  oil  to  the  detriment 
of  the  other  railroads  and  the  refining  interests. 

(10)  Stress  is  laid  on  the  relations  between 
the  Standard  Oil  Company  and  the  rail- 
roads between  1872  and  1880  ;  and  to  the 
alleged  special  rates  and  favors  it  received 
from  them  is  attributed  its  power  to  destroy  the 
business  of  its  competitors  and  acquire  their 
properties.  This  is  charged  even  with  respect 
to  the  acquisition  of  the  Cleveland  refineries  in 
1871  and  1872,  but,  as  we  have  already  said, 
without  any  foundation.  But  certain  later  con- 
tracts between  it  and  the  railroads  are  annexed 
to  the  bill,  and  this  operation  and  effect  is 
claimed  for  them.  There  is  no  basis  for  this  claim. 

Whatever  was  done  is  to  be  judged  by  the 
standards,  conditions  and  law  of  those  days  and 
not  by  the  standards,  conditions  and  law  of  the 
present  time.  It  was  a  time  of  intense  struggle 
between  the  trunk  lines  for  every  kind  of  traffic, 
with  alternating  short  periods  of  agreed  rates  or 
pooling.  Schedule  rates  were  merely  nominal. 


48 

Special  contracts  with  shippers  who  could 
command  even  a  small  volume  of  any  par- 
ticular kind  of  traffic  were  the  custom.  Shippers 
went  from  railroad  to  railroad  for  the  best  terms 
they  could  get,  and  railroads  offered  the  induce- 
ments of  special  rates  or  rebates  to  get  the  busi- 
ness. The  shipper  who  commanded  a  large  and 
steady  volume  of  traffic  insisted  that  he 
was  entitled  to  lower  rates  because  of  that 
fact.  There  was  legal  authority  justifying  him 
in  making  that  claim.  (See  Nicholson  vs.  Great 
Western  Ry.  Co.,  4  C.  B.  (N.  S.)  366 ;  Cleveland 
&c.  R.  R.  Co.  vs.  Closser,  126  Ind.,  348  ;  Oxlade 
vs.  N.  E.  Ry.  Co.,  i  Ry.  &  Can.  Traf.  Cases,  72 ; 
Root  vs.  L.  I.  R.  R.  Co.,  1 14  N.  Y.,  300.)  In  other 
words,  it  was  recognized  that  a  wholesale  shipper 
was  entitled  to  a  lower  rate  than  a  retail  shipper; 
that  a  refiner  who  could  deliver  to  the  railroad  a 
train-load  of  oil  every  day  or  every  other  day 
was  justified  in  insisting  upon  a  lower  rate  than 
a  refiner  who  delivered  smaller  quantities  at 
irregular  times  which  had  to  be  transported  in 
trains  made  up  of  different  species  of  traffic. 
Indeed  the  contrary  rule  which  prevails  now 
is  an  arbitrary  protection  of  the  smaller  shipper, 
and  not  founded  on  any  principle  of  reason 
or  business. 


49 

Whether  the  Standard  Oil  Company  in  the 
earliest  period  obtained  better  rates  than  its 
competitors  there  is  no  evidence  to  show. 
There  could  be  none  because  every  ship- 
per was  making  his  own  contracts  for 
rates  and  keeping  them  to  himself. 
It  is  fair  to  assume  that  in  the  main  it  got  as 
low  rates  as  anybody,  and  lower  than  some  be- 
cause of  the  volume  of  its  business ;  but  that  was 
an  incident  of  the  business  and  not  an  advantage 
forged  as  a  weapon  of  assault. 

We  turn  now  to  the  specific  contracts  during 
this  period  which  are  annexed  to  the  bill. 

(a)  Exhibits  3,  4  and  5  are  contracts  made 
with  the  Erie  and  New  York  Central  roads 
in  1874  and  1875,  relating  in  the  main 
to  the  operation  of  oil  terminals,  in  the 
one  case  at  Weehawken,  New  Jersey,  and 
in  the  other,  at  Hunters  Point,  Long  Island, 
and  on  the  Hudson  River  at  or  about  Sixty- 
fifth  Street,  and  they  were  necessary  and  justifi- 
able. The  oil  traffic  was  a  special  traffic  which  re- 
quired special  handling  and  facilities  in  ware- 
houses on  its  arrival  at  destination.  The 
damage  to  the  barrels  in  course  of  trans- 
portation required  cooperage  or  refilling  in 


50 

new  barrels  before  being  reloaded  on  lighters 
to  be  taken  to  the  various  docks  where  they 
were  again  unloaded  for  shipment  by  vessel. 
The  entire  service  was  a  distinctly  special 
service  and  the  Standard  Oil  Company  was 
most  interested  in  its  proper  performance  be- 
cause of  the  volume  of  its  traffic.  That  was 
the  reason  for  these  contracts  whereby  it  as- 
sumed to  operate  the  terminals,  consisting  of 
warehouses,  and  to  make  uniform  charges  to  all 
parties  who  used  them  or  for  whom  services 
were  performed  as  low  as  any  other  oil  yard 
affording  facilities  "  for  the  transfer,  storage, 
preparation  and  shipment  of  the  oil  at  the 
terminus  of  any  railway,  or  other  line  competing 
with  the  Erie  Railway,  at  or  adjacent  to  the  port 
of  New  York,  and  generally  so  to  manage  the 
premises  as  to  give  all  patrons  of  the  road  fair 
and  equal  facilities  for  their  oil  business  at  uni- 
form cost"  (Bill,  p.  210). 

In  the  case  of  the  New  York  Central  the  Oil 
Company  agreed  to  provide  at  Hunters  Point 
and  on  the  Hudson  River  (Bill,  p.  217) 

a  large  and  commodious  warehouses,  wharves 
and  piers,  amply  provided  with  tankage  and 
all  the  necessary  appliances  for  the  receipt 
from  the  boats,  barges  and  cars  of  the  party 


51 

of  the  second  part  (the  railroad  company) 
of  crude  petroleum  or  the  products  of  crude 
petroleum  ;  the  cooperage,  warehousing  and 
delivery  of  the  same  to  consignees  in  a 
prompt  and  efficient  manner,  and  to  receive 
upon  the  side  tracks  adjacent  to  its  said 
property  at  the  foot  of  65th  Street  all 
crude  petroleum  which  may  be  consigned  to 
that  point  and  unload  the  same  and  deliver 
the  same  to  consignees  on  demand,  doing 
and  performing  in  respect  thereto  all  such 
other  things  as  the  party  of  the  second  part 
may  be  bound  to  do ;  also  to  receive  upon 
the  wharves  of  the  party  of  the  first  part  at 
Hunters  Point  aforesaid  all  the  products  of 
crude  petroleum  in  packages,  which  may  be 
consigned  to  that  point,  and  deliver  the 
same  to  consignees  upon  demand,  doing 
and  performing  in  respect  thereto  all  such 
other  things  as  the  party  of  the  second  part 
may  be  bound  to  do." 

The  terminals  at  Hunter's  Point  and  at  65th 
street  on  the  Hudson  River  were  owned  by  the 
Standard  Oil  Company,  and  the  Railroad  Com- 
pany was  relieved  by  this  arrangement  from  pro- 
viding at  its  own  expense  other  terminals  for 
shippers  other  than  the  Standard. 

These  contracts  originated  in  a  practical  neces- 
sity which  justified  them,  and  there  is  no  evidence 
that  they  operated  injuriously  to  other  shippers 
or  refiners. 


52 

It  is  to  be  observed  that  the  contract  of  April 
17,  1874,  is  an  instance  of  a  special  contract  for 
rates.  (Bill,  p.  208).  The  Railroad  company  was 
to  furnish  the  cars  and  haul  them  to  its  Wee- 
hawken  yards  in  full  trains  whenever  practica- 
ble. The  rates  of  freight  were  to  be  made  by 
the  President  of  the  Atlantic  and  Great  Western 
Railroad  Company,  the  Erie's  western  connec- 
tion, and  the  Oil  Company,  to  the  satisfaction  of 
the  former,  and  were  not  to  be  higher  than  the 
rates  paid  by  competitors  of  the  Oil  Company 
from  competiting  western  refineries  to  New  York. 
The  Oil  Company  was  not  to  ship  more  than  50 
per  cent,  of  the  product  of  its  refineries  by  any 
other  lines  eastward  ;  it  assumed  all  risks  of 
losses  by  fire,  natural  leakage  or  breakage  ;  and 
it  was  itself  to  load  the  trains  at  the  place  of  ship- 
ment and  unload  them  at  the  place  of  destina- 
tion. Thus  it  did  its  own  loading  and  unloading, 
assumed  unusual  risks,  and  its  traffic  moved  in 
trainloads. 

(b)  Exhibit  6,  dated  October  ist,  1874,  is  an 
agreement  between  the  Pennsylvania,  New  York 
Central  and  Erie  Companies  pooling  the  oil 
traffic  from  the  oil  regions  to  New  York  via  the 
three  trunk  lines,  and  to  Philadelphia  and  Balti- 


53 

more  via  the  Pennsylvania  Railroad.  The  New 
York  proportion  was  fixed  at  62.46  per  cent,  of 
the  total,  in  which  each  of  the  companies  was  to 
share  equally.  The  Philadelphia  and  Baltimore 
proportion  was  fixed  at  37.54  per  cent.,  to  all  of 
which  the  Pennsylvania  Railroad  was  entitled. 
The  rates  on  refined  oil  from  Cleveland,  Pitts- 
burg  and  the  oil  regions  to  New  York,  Phila- 
delphia, Baltimore  and  Boston,  and  the  rates  on 
crude  oil  to  the  same  points  were  prescribed. 
Particular  exception  is  taken  to  the  following 
provision  (Bill,  p.  222)  : 

u  The  roads  transporting  the  refined  oil 
shall  refund  to  the  refiners  as  a  drawback 
the  charges  paid  by  them  upon  the  crude 
oil  reaching  their  refineries  by  rail ;  and  the 
roads  transporting  through  crude  oil  to  the 
eastern  seaboard  shall  refund  to  the  shippers 
22  cents  per  barrel ;  both  of  said  drawbacks 
to  be  paid  only  on  oil  reaching  the  initial 
points  of  rail  shipment  through  pipes  the 
owners  of  which  maintain  agreed  rates  of 
pipeage,  it  being  understood  that  the  said 
rates  of  pipeage  shall  be  equitably  adjusted 
as  between  the  several  railroads,  and  that 
they  shall  set  forth  in  a  contract  to  be  en- 
tered into  between  each  pipe  line  and  the 
trunk  lines  parties  hereto  ;  said  agreed  rates 


54 

of  pipeage  being  of  importance  to  the  parties 
hereto  and  constituting  a  valuable  considera- 
tion to  them." 

Upon  which  we  observe  : 

(1)  That  the  provision  to  refund  to  the  refiner 
the   freight   on  the  crude  oil  was   to   make  u  a 
group   rate  "    for    refined   oil    from   Cleveland, 
Pittsburg  and  the  oil  regions  to  the  seaboard, 
placing  them  all  on   an  equality,  which   was  a 
usual  and  established  practice   with  respect  to 
many   similar   kinds   of   traffic.     The  objection 
made  to  this  provision  could  be  made  to  every 
"  group  rate  "  that  has  ever  been  established. 

(2)  The  provision  for  the  refund  of  22  cents  a 
barrel  on  the  crude  oil  transported  to  the  sea- 
board was  to  place  the  seaboard  refineries  on  an 
equality  with  the  inland  refineries.     Thus    the 
rate  on  refined  oil  from  Cleveland  to  New  York 
was,  according  to  the  contract,  $1.90  per  barrel, 
less  the  crude  rate  of  35  cents  per  barrel  from  the 
oil  regions  to  Cleveland.     As  a  barrel  of  refined 
was  the  equivalent  of  one  and  one-third  barrels 
of  crude  the  amount  to  be  deducted  would  be  35 
cents  plus  one-third  of  35  cents,  or  n.666  cents, 
making   a   total   of   46.666   or    47    cents.     De- 
ducting that  sum  from  the  rate  on  refined  oil 


55 

would  make  the  rate  to  New  York  $1.43. 
Refunding  to  the  seaboard  refiner  22  cents  a 
barrel  his  rate  of  $1.65  for  crude  oil  would 
be  reduced  to  $1.43.  Thus  the  rate  on  a 
barrel  of  refined  oil  from  Cleveland  to  the  sea- 
board was  made  the  same  as  the  rate  on  a  barrel 
of  crude  oil  from  the  oil  regions  to  the  seaboard, 
and  thereby  the  refiners  at  Cleveland  and  the 
refiners  at  New  York  were  put  on  an  equal 
basis. 

(3)  The  last  clause  of  the  provision  respecting 
the  drawbacks  being  paid  only  on  oil  reaching 
the  initial  points  of  rail  shipment  through  pipes 
the  owners  of  which  maintained  agreed  rates  of 
pipeage  was  necessary  for  two  reasons  ;  first, 
to  maintain  uniform  pipeage  rates,  and  second, 
to  guard  against  the  drawbacks  being  used  as  a 
fund  for  rebates  between  the  pipe  line  companies 
and  the  shippers  at  the  expense  of  the  railroad 
companies.  Petitioner's  Exhibit  770  (Vol.  10, 
p.  1817)  shows  that  the  sum  of  22  cents  men- 
tioned in  this  agreement  was  the  charge  for 
pipe  line  transportation,  and  it  was  manifestly 
absorbed  in  the  railroad  rates  prescribed  by  the 
agreement.  Necessarily  it  should  only  be  re- 


56 

funded  when  it  had  been  paid,  and  it  would  only 
be  paid  if  the  agreed  pipeage  rates  were  main- 
tained. 

(c)  The  agreement  between  the  Standard  Oil 
Company  and  the  Pennsylvania  Railroad  of 
October  17,  1877  (Bill,  p  227) ;  in  connection 
with  which  it  is  averred  that  there  were  similar 
contracts  with  the  New  York  Central  and  Erie 
Companies  (Bill,  pp.  31  and  32).  These  contracts 
were  what  is  known  as  "  evener  "  contracts  and 
were  common  in  the  railroad  practice  of  that  time. 
One  of  the  methods  then  in  vogue  to  avoid  the 
enormous  losses  from  rate  wars  among  the  rail- 
roads was  an  agreement  apportioning  the  heaviest 
kinds  of  traffic,  such  as  grain,  cattle  and  oil,  be- 
tween them  in  fixed  proportions ;  and  to  make 
such  an  agreement  effective  one  or  more  of  the 
heaviest  shippers  were  selected  to  so  arrange 
their  business  and  apportion  their  shipments  as 
to  maintain  the  proportions  fixed.  For  that 
service  they  were  paid  a  commission.  The 
Standard  Oil  Company  as  the  heaviest  shipper 
of  oil  was  made  the  u  evener  "  in  connection  with 
the  pooling  agreement  between  the  railroads  of 
October,  1877,  and  that  was  the  purpose  of  this 
agreement,  Exhibit  7,  and  the  agreements  of 


57 

similar  tenor  with  the   other   trunk   lines.     Dr. 
Leonard  Bacon  has  said  of  this  method: 

"  The  delegating  of  this  task  of  evener  to 
the  largest  of  the  concerns  engaged  in  ship- 
ping by  the  competing  lines  seemed  by  com- 
mon consent,  at  that  stage  in  the  evolution 
of  the  railroad  system,  to  be  a  necessary  ex- 
pedient for  the  operating  of  a  "  pool "  for 
the  ending  of  destructive  railroad  wars.  In 
the  livestock  pool  between  the  trunk  lines 
from  Chicago  to  New  York  in  1875,  the 
allowance  to  the  heavy  Chicago  house  that 
undertook  the  task  of  evener  was  to  be  $15 
for  each  carload  by  whomsoever  shipped.  It 
was  a  crude  method  liable  to  serious  ob- 
jections, and  yet,  to  the  railroad  men  of  that 
day  it  had  this  in  its  favor,  that  no  better 
way  had  then  been  devised  for  avoiding  the 
evils  and  abuses  far  more  damaging  to  all 
the  interests  concerned,  including  the  public 
interest,  than  this  method  of  the  pool  and 
the  evener" 

(d)  The  contracts  between  the  American  Trans- 
fer Company  and  the  Pennsylvania  Company 
and  other  trunk  lines  respecting  the  payment  of 
first,  20  cents,  and  then  22^/2  cents,  a  barrel  on 
all  crude  oil  transported  by  the  railroads  (Bill, 
PP-  33,  34  ;  Exhibit  8,  p.  231 ;  Exhibit  9,  p.  234). 

It  is  to  be  observed  that  this  is  a  contract  be- 
tween transportation  companies.  The  American 


58 

Transfer  Company  had  pipe  lines  of  its  own  and 
represented  the  lines  of  the  United  Pipe  Lines.  It 
gathered  and  bought  oil  at  the  wells,  transported 
it  to  the  railroad  junction  points,  and  largely  con- 
trolled the  line  of  its  railroad  transportation.  It 
built  lines  and  provided  facilities  at  the  instance, 
and  for  the  benefit,  of  the  various  railroads. 
(See  statements  in  both  contracts.)  The  trans- 
portation of  crude  oil  from  the  wells  to  the  point 
of  destination  was  thus  a  joint  service  of  the 
Railroad  companies  and  the  American  Transfer 
Company  and  the  pipe  lines  it  controlled,  and 
the  burden  of  providing  the  facilities  to  make 
the  necessary  railroad  connections  fell  upon  the 
Transfer  Company.  The  Transfer  Company 
evidently  deemed  that  it  was  entitled  to  the  com- 
pensation provided  by  these  contracts  for  its 
share  in  the  joint  service,  in  obtaining  and 
furnishing  the  traffic,  and  in  providing  the  facili- 
ties, and  there  is  nothing  in  the  record  to  im- 
peach at  this  distance  of  time  the  fairness  of  its 
claim  or  the  measuring  of  the  compensation  by 
the  total  crude  shipments,  all,  or  practically  all, 
of  which  it  would  seem  were  received  by  the  rail- 
roads through  the  lines  of  the  Transfer  Com- 
pany. 


59 

(e)  It  is  charged  that  at  this  time  an  additional 
15  cents  per  barrel  on  shipments  of  crude  oil  was 
allowed  to  the  Standard  Oil  Company  as  a  further 
rebate.  (Bill,  p.  35).  Mr.  Cassatt  in  his  testi- 
mony given  in  March,  1879,  explains  that  this 
reduction  of  the  rate  was  made  at  a  conference 
of  railroad  presidents  in  July,  1878,  to  meet  a 
rate  that  had  been  made  via  Buffalo  and  the  Erie 
Canal ;  that  it  was  only  in  force  until  the  closing 
of  the  canal  in  December  of  that  year  ;  and  that 
it  was  not  made  exclusively  to  the  Standard  Oil 
Company  but  to  any  shippers  who  were  not 
shipping  over  the  line  via  Buffalo  and  the  canal. 
(Vol.  20,  pp.  12,  13,  19,  30,  31). 

( /)  There  is  no  substantial  evidence  that  these 
contracts,  rates,  reductions  and  allowances  which 
we  have  reviewed  had  any  relation  to  the  ac- 
quisitions of  refining  and  pipe  line  properties  by 
the  Standard  Oil  interests  during  these  years. 
They  certainly  did  not  induce  the  sale  of  the 
Cleveland  refineries,  of  the  Charles  Pratt  & 
Company  refinery,  of  the  Atlantic  Refining 
Company's  refinery,  and  the  other  refineries  at 
Pittsburg  and  Philadelphia  represented  by 
Warden,  Frew  &  Company,  the  Imperial  Re- 
finery at  Oil  City,  the  refineries  of  Porter,  More- 


60 

land  &  Company  and  Bennett,  Warner  &  Com- 
pany, at  Titusville,  the  refineries  and  pipe  lines 
of  the  Empire  Transportation  Company,  the 
refinery  of  the  American  Lubricating  Oil  Com- 
pany, the  refineries  at  Parkersburg  and  Balti- 
more, or  the  interest  in  the  Galena  and  Signal 
Companies ;  and  these  constitute  the  great  bulk 
of  the  acquisitions  during  those  years.  The 
owners  of  those  establishments  were  not  forced 
to  sell  because  the  Standard  obtained  better  rail- 
road rates  than  they  could  get,  or  under  compul- 
sion of  any  kind.  Doubtless  various  small  re- 
fineries at  different  points,  particularly  in  the 
oil  regions,  that  were  not  equipped  to  compete 
successfully,  and  the  owners  of  which  could  not 
find  the  capital  to  make  the  improvements  ne- 
cessitated by  the  progress  of  the  business,  or  for 
other  reasons  of  that  kind,  were  desirous 
of  selling,  and  did  sell,  were  purchased  not 
for  their  refining  capacity  but  because  they 
had  a  certain  amount  of  trade,  and  the  physical 
property  could  be  utilized  in  connection  with 
other  refineries.  This  was  all  the  dismantling 
there  has  ever  been  of  independent  refineries. 
These  have  been  called  purchases  "  to  put  them 
out  of  business,"  and  it  is  deemed  to  be  evi- 


61 

dence  enough  of  that  motive  that  some  of  them 
were  dismantled  ;  but  the  fact  is  just  as  we  have 
stated  it. 

Bxcepting  some  very  general  and  vague  state- 
ments there  is  no  evidence  in  the  record 
showing  or  tending  to  show  any  causal  con- 
nection between  the  railroad  rates  which  the 
Standard  obtained  between  1870  and  1882  and 
its  acquisitions  during  that  period. 

(n)  The  period  of  these  acquisitions  extended 
from  1871  to  1879.  The  Cleveland  refineries 
were  acquired  by,  and  conveyed  to,  the  Standard 
Oil  Company  of  Ohio.  All  the  other  properties 
were  acquired  for  the  stockholders  of  that  com- 
pany. The  earnings  of  the  Company  over  and 
above  a  moderate  annual  dividend,  represent- 
ing the  margin  between  a  legitimate  manufact- 
uring profit  in  a  business  of  that  hazardous 
character  and  such  a  dividend,  instead  of 
being  paid  out  in  dividends  to  the  stock- 
holders were  used  to  acquire  these  prop- 
erties for  their  benefit.  When  physical 
properties  were  acquired  they  were  conveyed  to 
individuals  in  their  behalf.  When  stocks  of  cor- 
porations were  acquired,  or  stocks  of  new  com- 


62 

panics  organized  to  take  over  properties  were 
subscribed  and  paid  for,  they  were  taken  in 
the  names  of  individuals  for  the  same  purpose. 
In  1879  the  title  to  these  properties  and  stocks, 
all  held  in  such  undivided  common  ownership, 
was  vested  in  three  trustees  by  an  instrument 
which  is  found  in  the  record  (Deft.'s  Ex.  257, 
Vol.  19,  pp.  618-620).  It  is  known  as  the  Vilas, 
Keith  and  Chester  agreement.  It  was  an  ex- 
ecuted transfer  of  all  these  properties  and  stocks 
by  the  individuals  who  held  them  on  behalf  of 
the  stockholders  of  the  Standard  Oil  Company 
of  Ohio  to  Vilas,  Keith  and  Chester  as  trustees 
in  trust,  to  hold,  control  and  manage  them  for 
the  exclusive  use  and  benefit  of  the  persons 
named  in  the  agreement,  and  in  the  pro- 
portions therein  stated,  and  to  divide  and 
distribute  them  as  soon  as  it  could  con- 
veniently be  done  between  the  beneficiaries 
in  the  proportions  stated.  The  beneficiaries 
were  the  stockholders  of  the  Standard  Oil 
Company  of  Ohio,  and  their  respective  pro- 
portions were  the  proportions  in  which 
they  owned  the  stock  of  that  company.  It 
thus  appears  that  the  individuals  who  were 
the  stockholders  of  the  Standard  Oil 


63 

Company  of  Ohio  owned  these  properties  and 
stocks  from  the  time  of  the  several  acquisitions 
in  an  undivided  common  ownership.  Hence 
the  concerns  and  businesses  acquired  were  not 
after  their  acquisition  independent  or  competitive 
concerns. 

(12)  In  January,  1882,  the  so-called  Standard 
Oil  trust  was  constituted  (Bill,  pp.  40-51).  The 
parties  to  that  agreement  are  embraced  in  three 
classes.  The  second  class  is  made  up  of  certain 
named  individuals,  who  were  the  stockholders 
of  the  Standard  Oil  Company  of  Ohio  and 
the  owners  of  the  corporations  named  in  the  first 
class  in  their  entirety,  and  of  a  part  of  the  shares 
of  the  corporations  named  in  the  third  class, 
and,  with  a  few  exceptions,  of  the  major  part.  // 
was  not  an  agreement  bringing  together  independ- 
ent competing  concerns  separately  owned,  but  an 
agreement  between  common  owners  of  various 
properties  for  the  purposes  therein  expressed.  It 
did  not  affect  the  relations  of  the  properties  to 
each  other  or  unite  them  in  any  different  owner- 
ship than  had  existed  before.  After  the  agree- 
ment was  executed  the  same  ownership  interests 
in  all  the  properties  were  represented  by  trustees' 


64 

certificates  as  they  Had  previously  been  repre- 
sented by  shares  of  the  Standard  Oil  Company 
of  Ohio  and  the  Vilas,  Keith  and  Chester  trust. 
It  was  purely  an  arrangement  between  the  com- 
mon owners  of  various  properties  and  stocks 
concerning  the  form  in  which  the  legal  title  to 
the  properties  and  stocks  should  be  held  and  the 
interest  of  the  real  owners  be  evidenced,  as  dis- 
tinguished from  a  combination  of  different  com- 
peting properties  and  businesses  separately  and 
independently  owned. 

(13)  At  this  time  these  properties  in  common 
ownership  consisted  of  refineries  at  Cleveland, 
Oil  City,  Titusville,  Buffalo  (acquired  in  1882), 
Pittsburg,  Philadelphia,  Parkersburg,  Baltimore 
and  the  Atlantic  seaboard  in  and  about  New  York 
harbor  ;  of  the  pipe  line  system  which  has  been 
described,  and  of  marketing  organizations  in 
various  parts  of  the  country.  Naturally  after 
the  acquisition  of  these  properties  the  main 
process  was  one  of  their  unification  and  in- 
tegration into  a  single  business  to  secure 
efficiency  and  economy.  The  acquisitions 
after  this  time  were  of  minor  importance  and 
have  no  material  bearing  on  the  questions  in- 


65 

volved  in  this  case.  The  structure  of  the  organ- 
ization was  not  affected  by  them  one  way  or  the 
other,  and  its  history  would  have  been  the  same 
without  them  as  with  them.  But  there  was  con- 
stant internal  expansion  and  development  as 
markets  were  established  all  over  the  world 
and  the  use  of  the  products  increased.  Existing 
refineries  were  enlarged  and  new  refineries  were 
built  at  places  best  adapted  for  the  economical 
distribution  of  the  products.  As  new  oil  fields 
were  discovered  the  pipe  line  systems  were 
extended  to  supply  their  needs ;  and  mar- 
keting stations,  consisting  of  tanks  for 
the  storage  of  oil  and  tank  wagons  for 
its  distribution,  were  established  all  over  the 
country.  Tank  steamers  were  provided  for 
the  transportation  of  the  products  to  countries 
in  every  quarter  of  the  globe,  and  marketing 
stations  were  established  there  for  its  stor- 
age and  distribution.  The  development  along 
all  these  lines  has  been  the  result  of  growth 
and  expansion,  and  not  of  combination  or  ac- 
quisition. The  period  of  acquisition  substan- 
tially stopped  as  early  as  1879, — thirty  years 
ago. 


66 

The  most  marked  feature  of  this  development 
during  the  past  fifteen  years  has  been  the 
marketing  of  the  oil  all  over  this  country  by 
the  Company  itself.  Previous  to  that  time  it 
had  relatively  few  marketing  stations  and  sold 
principally  to  jobbers  who  dealt  with  the  re- 
tailers. The  jobber  made  his  own  prices  and 
the  retailer  was  at  his  mercy.  After  the  new 
system  was  inaugurated,  and  the  Company  dealt 
directly  with  the  retailer  by  multiplying  its 
marketing  stations  and  expanding  its  system  of 
tank  wagon  deliveries,  the  jobber  was  neces- 
sarily eliminated  from  the  trade  as  a  mid- 
dleman whereever  the  system  reached.  These 
jobbers  had  plants  consisting  of  storage 
tanks  and  delivery  wagons,  and  cus- 
tomers along  the  routes  which  were  traversed 
by  their  wagons.  They  retired  from  the  busi- 
ness to  a  very  large  extent  as  the  Company 
established  its  own  marketing  stations  and 
the  middleman's  profit  disappeared,  and  their 
plants  and  the  good-will  of  their  routes  were 
for  sale,  and  the  Company  bought  them.  Such 
acquisitions  were  numerous  all  over  the  country, 
but  they  were  a  natural  incident  in  the  in- 
evitable development  of  the  business  and  not 


67 

the  result  of   an  unnecessary  movement  simply 
to  displace  the  jobber  as  a  competitor. 

How  complete  the  structure  of  the  Standard 
Oil  organization  was  in  1882  is  apparent  from 
its  structure  at  the  present  time.  The  Bayonne 
works  and  the  Eagle  works  at  Cummunipaw,  the 
two  principal  refineries  of  the  Standard  Oil  Co. 
of  New  Jersey,  date  back  to  1877.  Its  works 
at  Parkersburg  and  its  Baltimore  works  date  back 
to  the  same  time,  and  its  Atlas  works  at  Buffalo 
to  1882.  The  chief  works  of  the  Standard  Oil 
Co.  of  New  York  are  the  Pratt  works  in 
Brooklyn,  the  Queens  County  works,  the  Sone 
&  Fleming  refinery,  and  the  Long  Island  works, 
which  all  date  back  to  the  period  between  1872  and 
1877.  The  refineries  of  the  Standard  Oil  Co. 
of  Ohio  at  Cleveland  date  back  to  1870  and  the 
period  between  that  year  and  1877.  The 
refineries  of  the  Atlantic  Refining  Co.  at 
Philadelphia  and  at  Pittsburgh  and  its  Eclipse 
works  at  Franklin  date  back  to  the  same  years. 
The  Vacuum  Oil  Works  at  Rochester  and  Olean 
date  back  to  1879  or  thereabouts.  The  interest 
in  the  Galena  Signal  Oil  Works  dates  back  to 
1879. 


68 

The  remaining  refineries,  being  those  at 
Whiting,  Ind.,  at  Sugar  Creek  in  Missouri,  and 
Wood  River  in  Illinois,  of  the  Standard  Oil  Co. 
of  Indiana;  the  refinery  at  Neodesha,  Kan.  of 
the  Standard  Oil  Co.  of  Kansas ;  the  refinery  at 
Lima,  O.  of  the  Solar  Refining  Co.,  and  the  re- 
finery at  Richmond  Cal.  of  the  Standard  Oil 
Co.  of  California,  are  all  creations  of  the  Stand- 
ard organization  since  1882. 

The  pipe  line  system  so  far  as  any  of  it  was 
acquired,  with  the  exception  of  less  than  a  thou- 
sand miles,  dates  back  to  the  period  between 
1873  and  1881 ;  and  the  foundations  of  the  mar- 
keting system  in  the  various  regions  of  this 
country  were  laid  during  the  same  period. 

The  organization  is  in  all  the  main  features 
of  its  structure  a  creation  of  the  period  between 
1870  and  1 88 1 ;  and,  in  the  main,  prior  to  1879. 

(14)  In  1892  the  so-called  Standard  Oil  Trust 
was  dissolved  as  a  result  of  the  decision  of  the 
Supreme  Court  in  the  State  of  Ohio  vs.  The 
Standard  Oil  Company  (49  Ohio  St.,  137).  No 
change  of  ownership  followed  from  this  step. 
The  real  owners  of  the  properties  before  the  dis- 
solution were  the  certificate  holders,  who  were 


69 

originally  the  stockholders  of  the  Standard  Oil 
Company  of  Ohio.  The  plan  of  dissolution 
was  for  the  trustees  to  assign  to  the  cer- 
tificate holders  their  proportionate  shares  of 
all  the  property  and  stocks  held  by  the  trustees. 
A  part  of  the  certificate  holders  at  once 
surrendered  their  certificates  and  received  as- 
signments of  their  respective  proportionate 
shares,  and  on  their  surrender  to  the  various 
companies  of  these  assignments  received  the 
shares  of  stock  of  each  to  which  they  were  en- 
titled. The  shares  of  those  who  did  not  sur- 
render their  certificates  continued  to  be  held  for 
them  by  the  trustees.  There  was  no  change 
of  the  common  ownership  except  as  one  person 
might  be  substituted  for  another  on  a  transfer 
of  certificates.  There  was  no  separation  of  the 
ownership  of  the  shares  of  the  different  com- 
panies either  by  those  who  surrendered  their 
certificates  or  those  who  continued  to  hold 
them.  As  separate  shares  they  were  un- 
marketable, because  each  company  was  simply  a 
part  or  member  of  an  organism  though  a 
distinct  legal  entity  with  its  own  officers  to 
manage  its  affairs.  Those  who  had  exchanged 
their  assignments  from  the  trustees  for  shares 


70 

continued  to  hold  their  shares  in  a  mass,  just  as 
the  shares  of  those  who  did  not  surrender  their 
certificates  continued  to  be  held  by  the  trustees 
for  them  in  a  mass.  There  was  no  change  in  the 
conduct  of  the  business  as  a  unit.  The  function 
in  the  business  as  a  whole,  say  of  the  Stand- 
ard Oil  Company  of  New  York,  continued  just 
the  same  after  the  dissolution  as  before, 
and  the  same  is  true  of  all  the  other  companies. 
Every  owner,  whether  in  possession  of  shares 
of  the  respective  companies  or  in  possession  of 
trustees'  certificates,  was  after  as  before  the  dis- 
solution the  owner  of  a  fixed  proportionate  part 
of  all  the  companies  and  properties. 

(15)  This  was  the  situation  in  1899  when  the 
capital  stock  of  the  Standard  Oil  Company  (of 
New  Jersey)  was  increased.  All  the  owners 
then  owned  precisely  the  same  proportion  of  the 
shares  of  the  Standard  Oil  Company  (of  New 
Jersey)  that  they  did  of  the  shares  of  each 
of  the  other  companies.  In  1899  they  trans- 
ferred all  their  shares  in  the  various  com- 
panies to  the  Standard  Oil  Company  of  New 
Jersey,  and  received  for  the  proportion  of  the 
shares  which  had  been  represented  by  a  trust 


71 

certificate  a  share  of  the  common  stock  of  the 
Standard  Oil  Company  (of  New  Jersey).  In 
other  words,  the  owners  of  the  shares  of  these 
various  companies,  all  of  which  were  owned  by 
the  same  owners  in  the  same  proportions,  trans- 
ferred their  shares  to  one  of  the  com- 
panies in  the  common  ownership,  and  received 
for  them  its  shares  in  precisely  the  same 
proportion.  No  other  change  was  effected 
than  that,  and  that  was  not  a  change 
in  the  real  ownership  of  the  companies,  but 
merely  in  the  form  of  its  evidence.  Each 
share  of  the  Standard  Oil  Company's  stock 
represented  what  a  trustee's  certificate  had 
represented,  and  after  the  transfer  was  made 
the  individual  instead  of  holding  a  trustee's 
certificate  held  a  share  of  the  Company.  After 
the  transfer  the  stockholders  of  the  Standard 
Oil  Company  (of  New  Jersey)  owned  all  these 
properties  which  before  that  they  had  owned  as 
holders  of  trustee's  certificates,  and,  before  the 
formation  of  the  trust,  as  stockholders  of  the 
Standard  Oil  Company  of  Ohio.  The  business 
of  the  companies  and  their  relations  to  each 
other  were  absolutely  unchanged.  There  was 


72 

therefore  in  this  step  no  combination  of  pre- 
viously independent  competing  companies.  There 
has  been  the  same  common  ownership  since  the 
acquisition  of  the  separate  concerns  in  the  seven- 
ties ;  the  changes  have  only  been  in  the  form  of 
the  evidence  of  that  ownership. 


Summary  of  Facts  Bearing  on  Monopoly. 

(1)  There  has   not  been   at   any   time,   with 
possibly  one  or  two  trivial  exceptions,  any  ex- 
clusion of  the  capital  or  energies  of  others  from 
participation  in  the  business  by  restrictive  agree- 
ments   in    connection   with    the   acquisition    of 
plants  and  properties,  or  otherwise.     The  whole 
domain  of  the  business,  from  the  production  of 
the  crude  oil  to  the  marketing  of  the  manufac- 
tured products,  has  always  been  open  to  every- 
body. 

(2)  The   Standard   has   never  owned  or  con- 
trolled more  than  a  small  part  of  the  production 
of  crude  oil  in  the  various  oil  fields.     It  was  not 
engaged  in  production  at  all  until  the  year  1889. 
Since   and    including   that   year   the   following 


73 

figures  show  its  percentage  of  the  whole  produc- 
tion year  by  year  : 

Year.            Per  Cent.  Year.              Per  Cent. 

1889 15.90  1898 ••33-5° 

1890 24.05  1899 3T-68 

1891 26.22  1900. 3x-27 

1892 24.12  1901 27.13 

1893 28.84  1902 20.10 

1894 28.17  1903 , 17.24 

1895 30.12  1904 1444 

1896 28.76  1905 11.24 

1897 28.71  1906 1 1. 1 1 

Deft.'s  Ex.  266,  Vol.  19. 

In  1907,  out  of  a  total  of  170,717,593  barrels, 
its  production  was  17,896,141,  or  10^  per  centv 
These  figures  show  that  for  years  there  has  been 
a  steady  decrease  in  its  proportion. 

(3)  The  wide  distribution  of  the  oil  fields  has 
furnished  the  amplest  opportunity  for  participa- 
tion in  the  business,  both  with  respect  to  the 
location  of  refineries  and  pipe  line  construc- 
tion. Oil  is  produced  in  considerable  quanti- 
ties in  fourteen  or  fifteen  States.  Defendant's 
Exhibit  265  (Vol.  19,  p.  624),  compiled  from  a 
Government  publication,  shows  the  locations  of 


74 

the  oil  fields.  Down  to  1876  production  was 
confined  to  Pennsylvania  and  New  York.  The 
Lima-Indiana,  Mid-Continent,  Texas,  California 
and  Illinois  fields  have  been  discovered  from 
time  to  time  in  subsequent  years.  The  produc- 
tion of  Pennsylvania,  New  York,  West  Vir- 
ginia, Kentucky,  Tennessee,  Kansas,  Indian 
Territory,  Oklahoma  and  Illinois,  though 
varying  in  quality,  is  refinable  by  the  ordi- 
nary processes,  while  a  considerable  propor- 
tion of  the  production  of  California,  Ohio, 
Indiana,  Texas  and  Louisiana  is  only  re- 
finable  by  special  processes.  This  is  a  very 
different  situation  from  a  limited  and  confined  area 
of  production  favoring  concentration  of  refining 
points  and  pipe  line  facilities.  Actual  experi- 
ence has  demonstrated  that  there  has  been  no 
obstacle  to  the  establishment  of  refineries  with 
access  to  the  various  oil  fields,  with  or  without 
their  own  pipe  line  facilities,  or  to  the  employ- 
ment of  capital  in  the  construction  of  pipe  lines 
by  any  one  who  cared  to  engage  in  the  business. 
(4)  The  increase  in  the  production  of  crude 
oil  is  a  marvelous  record  and  one  quite  fatal  to 
the  allegations  of  monopoly.  At  the  time  of  the 
organization  of  the  Standard  Oil  Co.  of  Ohio  in 


75 

1870  the  total  production  had  for  the  first  time 
reached  5,000,000  barrels  in  one  year.  The 
10,000,000  barrel  mark  was  reached  in  the  year 
1874  ;  the  20,000,000  in  1880 ;  the  30,000,000 
(permanently)  in  1889  ;  the  40,000,000  in  1890  ; 
the  50,000,000  in  1891  ;  the  60,000,000  in  1896 ; 
the  70,000,000  in  1901  ;  the  80,000,000  in  1902; 
the  100,000,000  in  1903  ;  the  120,000,000  in 
1904;  the  130,000,000  in  1905  ;  the  170,000,000 
in  1907,  and  the  180,000,000  in  1908. 

The  increase  is  further  emphasized  by  the 
table  No.  266,  entitled  "  Statistical  Record  of  the 
Progress  of  the  United  States,  1800  to  1907, " 
found  in  the  Statistical  Abstract  of  the  United 
States  for  the  year  1907,  issued  by  the  Depart- 
ment of  Commerce  and  Labor,  under  the  heading 
"Production  of  Principal  Commodities."  In  that 
table  petroleum  is  given  year  by  year,  and  the 
following  figures  are  taken  from  it: — 

Year  Gallons 

1870 220,951,290 

l873 415,539,012 

1882 1,281,454,860 

1899 2,396,975,700 

5,312,745,312 


76 

The  figures  for  1908  also  show  the  wide  dis- 
tribution of  the  oil  producing  fields.    They  are  : — 

Field.  Barrels  (42  Gallons) 

Pennsylvania  (including  New  York 

and  part  of  Ohio) 25,053,810 

Lima  (part  of  Ohio,  Indiana) 10,005,547 

Mid-continent  (Kansas,  Oklahoma) . . .  48,488,43 2 

Illinois  34,019,708 

Gulf  Coast  (Texas  and  Louisiana)...   16,906,850 

California 48,306,737 

Other  production 400,000 


Total  183,181,084 

With  such  an  increasing  and  widely  dis- 
tributed output  of  the  raw  material  the  coercive 
monopolization  of  its  products  is  almost  incon- 
ceivable. 

(5)  The  enormous  internal  growth  and  expan- 
sion of  the  Standard  since  1882  through  the 
building  of  new  works,  the  enlargement  of  exist- 
ing ones,  the  new  construction  of  pipe  lines,  and 
the  expansion  of  its  markets  and  marketing 
facilities,  account  for  the  size  and  extent  of  its 
business,  and  not  the  acquisition  of  competitive 
plants. 


77 

It  was  not  until  the  year  1872  that  the  pro- 
duction of  crude  oil  reached  5,000,000  barrels. 
Between  that  time  and  1882  it  increased  to  about 
25,000,000  barrels,  and  all  of  its  principal  acqui- 
sitions of  refineries  and  pipe  lines  were  before 
1882.  It  is  true  that  the  production  in  1882  was 
30,000,000  barrels,  but  it  fell  again  in  the  suc- 
ceeding years  to  less  than  25,000,000.  Even 
this  production  exceeded  the  consumption  as  it 
appears  by  the  volume  of  Industrial  Statistics 
for  1892  issued  by  the  Secietary  of  Internal 
Affairs  of  the  State  of  Pennsylvania  that  the 
stocks  of  crude  oil  increased  from  1,084,423  in 
1872  to  34,596,612  in  1882,  largely  because  of 
the  enormous  production  in  the  years  1880, 
1881  and  1882.  In  1882  the  Standard,  in 
addition  to  its  refineries  at  Cleveland,  had 
established  itself  as  a  refiner  at  Philadelphia, 
Pittsburgh,  Titusville,  Oil  City,  Franklin, 
Parkersburg,  Buffalo,  Olean,  and  on  the  At- 
lantic Seaboard  around  New  York  harbor  and 
at  Baltimore.  At  that  time  the  value  of  its  re- 
fineries and  manufacturing  properties  was  $17,- 
000,000,  and  its  consumption  was,  as  appears 
by  Defendant's  Exhibit  268,  16,592,593  barrels. 
From  time  to  time  after  1882  it  enlarged  its  ex- 


78 

isting  works,  and  built  new  refineries  at  Marcus 
Hook,  Lima,  Ohio,  San  Francisco,  Whiting, 
Ind.,  Sugar  Creek,  Mo.,  and  Neodesha,  Kan., 
and  in  1906  the  total  value  of  its  refining 
plants  had  increased  to  $57,689,560  (Deft.'s 
Ex.  269,  Vol.  19,  page  627),  and  its  consump- 
tion to  65,000,000  barrels  (Deft.'s  Ex.  268). 

The  situation  in  California  may  be  cited  as  a 
striking  illustration  of  this  internal  expansion. 
In  1900  the  Pacific  Coast  Oil  Co.  had  about  fifty- 
six  acres  of  land  which  were  supposed  to  be 
good  for  producing  purposes ;  a  small  refinery 
at  Alameda ;  a  small  pipe  line  about  forty  miles 
long ;  and  a  small  bulk  steamer.  The  capacity 
of  the  refinery  was  about  260  barrels  of  crude 
oil  a  day.  The  pipe  line  ran  from  the  oil  pro- 
ducing field  to  the  coast  at  Ventura,  about  two 
or  three  hundred  miles  from  the  refinery  at  Ala- 
meda. The  Company's  stock  and  property  were 
purchased  by  the  Standard  in  that  year  for 
$760,000.  It  then  constructed  a  refinery  at 
Richmond,  Cal.,  utilizing  as  much  of  the  ma- 
terial of  the  Alameda  refinery  as  it  could,  which 
has  a  capacity  of  28,000  to  30,000  barrels  of 
crude  oil  a  day.  A  pipe  line  350  to  400  miles 
in  length  was  built  in  the  years  1902  and  1903 


79 

to  the  refinery  from  the  oil  fields  which  had  been 
recently  discovered  in  an  entirely  different  region 
of  California  from  that  tapped  by  the  short  pipe 
line  of  the  Pacific  Coast  Oil  Co.  In  1900  the 
total  production  of  crude  oil  in  California  was 
4,329,950  barrels,  and  in  1907  it  was  over 
40,000,000  barrels.  California  crude  could  not 
in  1900  be  refined  into  a  marketable  article, 
and  its  product  was  only  saleable  by  mixing  it 
with  eastern  refined  oil  in  the  proportion  of  30 
per  cent,  of  California  refined  to  70  per  cent,  of 
eastern  oil.  The  Standard,  through  its  chemists, 
invented  a  process  for  the  successful  refining 
of  the  native  oil  into  a  merchantable  article,  and 
now,  through  its  efforts,  all  the  Pacific  Coast 
trade  and  a  large  Oriental  trade  are  supplied 
with  oil  manufactured  from  California  crude. 
The  domestic  trade  amounted  in  1902  to  40,259 
barrels ;  in  1903  to  161,889 ;  in  1904  to  243,471 ;  in 
*9°5to  359>337;  11119061:0346,390;  and  in  1907 
to  440,856  barrels.  The  export  trade  was  in  the 
year  1904,  when  it  began,  61,342  barrels;  in 
1905,  271,900  barrels;  in  1906,  878,874  barrels, 
and  in  1907,  1,161,162  barrels. 

The   Pacific    Coast    Oil    Co.,  as  we  have  said, 
was  purchased  in   1900   for   $761,000.00     After- 


80 

wards  its  name  was  changed  to  the  Standard  Oil 
Company  of  California.  Its  net  assets  on  De- 
cember 3ist,  1906,  were  $21,329,952.00.  The 
authorized  capital  of  the  Company  is  now  $25,- 
000,000.00,  of  which  $17,000,000.00  have  been 
issued,  the  whole  of  which  was  paid  for  in  cash 
at  par  by  the  Standard  Oil  Co.  (of  New  Jersey). 
In  other  words,  the  Standard  Oil  Company  (of 
New  Jersey),  has  contributed  the  original  pur- 
chase price  and  $17,000,000.00  of  additional 
money  in  the  development  of  the  business  in 
California.  (Tilford,  Vol.  17,  pp.  3488,  3496, 
3522  and  3523).  The  California  Company  has 
only  paid  dividends  in  the  years  1906,  1907  and 
1908  ;  in  1906  and  1097  at  the  ra^e  °f  6  per 
cent.,  and  in  1908,  at  the  rate  of  10  per  cent. 

Defendant's  Exhibit  284,  Vol.  19,  page  683, 
shows  that  in  1902  the  Standard  Oil  purchased 
in  California  3,000,000  barrels  out  of  a  total 
production  of  14,000,000;  in  1903,  6,000,000 
out  of  a  total  of  24,000,000  ;  in  1904, 
9,500,000  out  of  a  total  of  29,700,000 ;  in  1905, 
9,500,000  out  of  a  total  of  34,000,000 ;  in  1906, 
9,500,000  out  of  a  total  of  32,500,000,  and  in  1907, 
9,000,000  out  of  a  total  of  40,000,000  ;  and  that 
its  own  production  was  in  1902  113,778  barrels; 


81 

in  1903,  91,133;  in  1904,  121,994;  in  1905, 
97,205  ;  in  1906,  59,556,  and  in  1907,  624,000 
barrels. 

What  it  has  accomplished  there  by  the  size  of 
its  own  undertaking  conld  have  been  accom- 
plished by  any  one  with  the  same  energy  and 
enterprise  and  willing  to  take  the  risks  of  such 
an  investment ;  and  others  are  now  actually  fol- 
lowing in  its  wake,  notably  the  California 
Petroleum  Refineries,  Ltd.,  with  its  refinery  with 
a  capacity  of  2,500,000  barrels  of  crude  per 
vear. 

In  1882  the  total  Standard  pipe  line  mileage 
was  3,531  miles,  divided  between  gathering  lines 
2,468,  and  trunk  lines  1,062.95.  In  I&99  itsltotal 
mileage  had  increased  to  14,653,  of  which 
10,749  miles  were  gathering  lines  and  3,904 
trunk  lines.  In  1908  the  total  mileage  was 
54,616,  of  which  45,227  were  gathering  lines  and 
9,388  were  trunk  lines.  Less  than  a  thousand 
miles  of  this  increase  were  acquired  by  pur- 
chase from  others.  The  balance  was  all  new 
construction  of  its  own.  After  1882  the  trunk 
lines  were  completed  to  the  seaboard  at  Bayonne, 
New  York,  Philadelphia  and  Baltimore  ;  gather- 


82 

ing  lines  were  built  for  the  Lima-Indiana  and 
Illinois  fields,  with  a  trunk  line  to  Chicago  ; 
for  the  great  Mid-continent  field,  with  a  trunk 
line  to  Whiting,  and  for  the  California  field. 
(Deft's  Exhibit  262,  Volume  19,  following  page 
621,  graphically  illustrates  the  increase  of  the 
pipe  line  mileage  during  the  period  stated). 

The  increase  in  the  marketing  stations  is 
shown  by  Defendant's  Exhibits  263  and  264 
(Vol.  19).  A  marketing  station  consists  of  tanks 
for  the  storage  of  oil,  with  tank  wagons  for  the 
distribution  of  the  oil  to  retailers.  Exhibits  263 
shows  that  in  1888  there  were  313  such  stations 
and  their  location.  Exhibit  264  shows  that  in 
1906  there  were  3,573,  and  their  location. 

The  efforts  of  the  company  have  been 
unceasing  in  the  development  of  the  markets 
of  the  world.  As  Mr.  Archbold  testified  (Vol.  19, 
p.  3290)— 

"  Our  trade  is  pretty  nearly  world- wide. 
There  is  scarcely  a  civilized  part  of  the 
globe  that  the  Standard  Oil  Co.  does  not 
reach  in  one  way  or  another  with  American 
oil.  Q.  And  has  it  been  a  slow  building-up 
process?  A.  It  has  been  a  process  since 
the  organization  began.  The  effort  began 
at  once  with  the  expansion  of  trade.  The 


83 

effort  of  the  Standard  Oil  Co.  from  its  very 
inception  has  been  the  development  of  the 
resources  of  this  country  and  the  extension 
of  its  commerce  throughout  the  world.  Q. 
In  the  Orient  and  in  Europe  is  it  your  en- 
deavor to  reach  the  consumer  direct  in  the 
same  way  you  do  here  ?  A.  It  is.  We  are 
as  rapidly  as  possible  putting  the  same  plan 
of  distribution  into  operation  in  all  those 
countries  that  we  have  here,  so  as  to,  with 
the  greatest  possible  economy,  reach  the 


consumer." 


Defendant's  Exhibit  276,  Vol.  19,  p.  660, 
shows  the  relative  volumes  of  the  Standard's 
export  and  domestic  trade  in  illuminating  oil,  as 
follows : 


84 
Year.  Exports.  Domestic. 

1891 57-x°  Per  Cent.  42.90  Per  Cent. 

1892 57.28  "  42.72         " 

1893 61.72  "  38-28 

1894 62.44  "  37-56 

1895 -60.15  «  39.85 

1896 63.61  "  36.39 

1897 64.25  "  35-75 

1898 62.17  "  37-83 

1899 60.21  "  39-79 

1900 ,...61.84  "  38.16 

1901 63.39  36.61 

1902 59'92  "  40.08 

1903 55-37  "  44.63 

1904 60.14  "  39.56 

1905 62.86  "  37.14     " 

1906 63.00  "  37-00 

The  development  of  the  business  is  remark- 
ably illustrated  by  the  table  on  page  525, 
Volume  III,  .of  the  Brief  on  the  Facts, 
which  shows  the  attention  that  has  been  con- 
tinuously given  to  the  utilization  of  the 
by-products  of  the  Standard  refineries,  their 
manufacture  into  useful  articles,  and  the  creation 


85 


and  expansion  of   the   demand   for  them.     The 
table  is  as  follows  : 

CRUDE  OIL  CONSUMED — CRUDE  OIL  YIELD, 
AND  THE  DIVISIONS  AS  BETWEEN  RE- 
FINED OIL  AND  ALL  OTHER  PRODUCTS 
BY  S.  O.  Co.  REFINERIES. 


Year 

Total 
Crude  Oil 
Consumed 
(Gallons) 

Total  Yield 
all  products 
(Gallons) 

Total 
Refined  Oil 
(Gallons) 

i895 

I9OO 
1904 
1906 

WtASiPSG 

^872,  159,702 

2,345,797,  J46 
2,728,248,642 

1,630,234,365 
1,774,807,397 
2,207,629,694 

2,57^919,995 

990,084,070 
1,098,236,795.5 
1,112,495,658 
1,209,441,341 

Percentage 

Total    By- 

Percentage 

Year 

Refined  Oil 

Products 

By-Products 

Of  Total 

(Gallons) 

of  Total 

1895 

60.73 

640,150,295 

39-27 

I9OO 

61.88 

676,570,601.5 

38.12 

1904 

50-39 

*,095,  134,036 

49.61 

1906 

47.02 

1,362,478,654 

52.98 

86 


Refined  Oil. 
Inc.   over  1895 
Per 
Year      Gallons        Cent. 


By-Products. 
Inc.    over    1895 

Per 
Gallons  Cent. 


1900  108,152,725.5  10.92 


36,420,306.5          5.69 


1904  122,411,588      12.36454,983,741  71.07 


1906  219,357,271      22.14 


722,328,359         112.84 


Thus  the  total  amount  of  illuminating  oil  for 
foreign  and  domestic  trade  had  come  to  be  in  the 
year  1906  less  than  one-half  of  the  total  product 
of  the  Standard  refineries,  the  remainder  con- 
sisting of  the  by-products  enumerated  by  Mr. 
Archbold  (Vol.  17,  p.  3255). 

In  the  same  brief  it  is  shown  that  in  the 
year  1906  bulk  for  bulk  the  illuminating  oil 
sold  in  the  United  States  by  the  Standard 
concerns  formed  only  17.39%,  or  about  one- 
sixth,  of  the  total  products  of  the  refineries,  and 
yet  the  brunt  of  the  charge  against  it  is  that  it 
is  a  monopoly  by  virtue  of  its  control  of  the 
illuminating  oil  trade  (Brief  on  the  Facts,  Vol. 

m,  p.  528). 

The  same  brief  (pp.  530,  531),  shows  that  the 
largest  estimate  of  the  profits  earned  on  the  de- 


87 

fendants'  domestic  trade  in  illuminating  oil  in 
1906  was  from  $14,000,000  to  about  $18,000,000. 
If  it  should  be  objected  that  it  does  not  appear 
that  the  profits  on  the  foreign  and  domestic  trade 
were  on  an  equality  attention  is  called  to  the 
following  figures  which  show  that  the  average 
export  prices  have  been  uniformly  higher  than 
the  average  domestic  refinery  prices  for  the  same 
kind  of  oil. 

Pet.  Ex.  1041  Def.  Ex.  293-3,  Aver- 

Year.  Export  W.  W.  age  Refinery  Prices 

Prices.  W.  W.  Oil. 

1895  5.84  5.24 

^96  5-77  4-93 

1897  4-68  4.02 

1898  4.97  4.26 

1899  6.29  5.25 

1900  6.96  5.44 

1901  5.60  4.96 
T9Q2  5.71  5.45 

1903  7-39  6.85 

1904  6.81  6.76 

1905  5.68  5.42 

1906  6.14  5.38 

The  foreign  companies,  to  whose  profits  refer- 
ence was  made  on  the  oral  argument,  are  mar- 


88 

keting  companies  only ;  so  that  the  fact  that  they 
have  apparently  made  a  lower  percentage  of 
profits  than  the  domestic  companies  has  no  sig- 
nificance. Most  of  the  domestic  companies,  espe- 
cially those  whose  profits  have  been  largest,  are 
both  refining  and  marketing  companies.  Natur- 
ally their  profits  would  be  very  much  larger 
than  those  of  mere  marketing  companies.  The 
comparison  between  export  prices,  which  include 
the  refining  profit,  and  the  average  domestic  re- 
finery prices,  is  the  proper  test,  and  it  establishes 
an  approximate  equality  between  the  export  and 
domestic  trade  in  refined  oil  as  to  profits. 

(6)  There  have  always  been  numerous  refineries 
in  this  country,  owned  by  other  parties,  engaged 
in  the  production  and  sale  of  oil  here  and  in  for- 
eign countries.  In  the  report  of  the  Commissioner 
of  Corporations  concerning  the  oil  industry,  dated 
May  2nd,  1906,  there  is  given  (on  page  59)  a  list 
of  65  so-called  independent  refineries  which  is 
headed  "  Principal  Independent  Refineries  in 
the  United  States  by  States,  1904."  That 
list  shows  refineries  at  various  points  in  Pennsyl- 
vania, New  York,  New  Jersey,  Ohio,  Kansas, 
Texas  and  California.  In  a  foot  note  on  page 
58  the  Commissioner  adds  six  others,  which 


"  began  operations  in  1905  and  1906  in  the 
Kansas  territory."  Referring  to  the  oil  regions 
in  Pennsylvania  he  states  (R.,  p.  84)  that 
"  there  are  two  independent  refineries  at  Brad- 
ford, ten  at  Warren,  Struthers  and  Clarendon, 
three  at  Titusville,  three  at  Coraopolis,  six  at 
Oil  City,  and  others  at  scattered  locations,  making 
altogether  more  than  thirty  such  establishments 
in  this  vicinity." 

Mr.  Emery,  in  his  testimony  in  this  case, 
named  52  independent  refineries  as  active  works, 
and  among  them  such  important  concerns  as 
the  Pure  Oil  Co.  with  its  refinery  at  Marcus 
Hook,  Pa.,  the  National  Refining  Co.  with  re- 
fineries at  Cleveland  and  other  points,  the  Gulf 
Refining  Co.,  and  the  Texas  Co.  His  list  with 
two  or  three  exceptions  is  confined  to  Ohio  and 
east  of  Ohio. 

The  witnesses  Westgate  and  Boltz  in  their 
testimony  named  36  refineries  which  have  formed 
an  association  known  as  the  National  Petroleum 
Association  for  the  advancement  of  their  interests 
(Vol.  6,  p.  2926 ;  Vol.  5,  p.  2054). 

Defendants'  Exhibit  277  (Vol.  19,  pp.  662  and 
663)  gives  a  list  of  123  competitive  refineries. 


90 

This  subject  is  exhaustively  treated  in  the 
Brief  on  the  Facts,  Vol.  L,  p.  231. 

In  the  report  of  the  Commissioner  of  Corpora- 
tions on  the  oil  industry  of  August  5th,  1907, 
it  is  said  at  page  651  : 

"  The  largest  independent  concern  in 
1904  scarcely  produced  more  than  200,000 
barrels  of  illuminating  oil.  Since  that  time, 
however,  two  or  three  independent  concerns 
have  enlarged  their  refineries  or  built  new 
ones  which  approach  more  nearly  to  the 
size  of  the  Standard  plants.  Thus,  the 
plant  of  the  Pure  Oil  Co.  at  Philadelphia 
has  a  capacity  of  about  700,000  barrels  (of 
42  gallons)  of  crude  per  year,  and  can  pro- 
duce on  the  basis  of  the  prevailing  yield 
from  Pennsylvania  crude  between  300,000 
and  400,000  barrels  (of  50  gallons)  of  illumi- 
nating oil  per  year.  The  Gulf  Refining 
Co.'s  plant  at  Port  Arthur,  Tex.  has  a  crude 
capacity  of  more  than  4,000,000  barrels  per 
year.  This  is  by  far  the  largest  independ- 
ent refinery  now  in  operation,  but  on  account 
of  the  small  proportion  of  illuminating  oil 
obtained  from  Texas  crude  its  output  of  that 
product  is  much  less  than  that  of  many  of 
the  Standard  plants,  probably  in  the  neigh- 
borhood of  500,000  barrels  per  year.  A 
new  independent  concern  in  California,  the 
California  Petroleum  Refineries,  Ltd.,  has  a 
plant  nearing  completion  which  will  have 


91 

a  capacity  of  about  2,500,000  barrels  of 
crude  per  year,  which  is  not  very  much  less 
than  the  capacity  of  the  Standard's  Cali- 
fornia plant,  which  in  1904  handled  about 
3,017,000  barrels." 

And  on  pages  636  and  637  : 

"  Many  independent  concerns  have  gone 
a  good  way  in  the  direction  of  integration. 
Thus  many  of  the  small  refiners  of  West- 
ern Pennsylvania  and  Ohio  are  interested 
in  crude-oil  production,  and  supply  part  of 
the  oil  which  they  refine.  A  considerable 
number  of  them  have  small  pipe  lines  or 
are  part  owners  of  pipe  lines  for  supplying 
their  refineries  with  crude.  A  large  pro- 
portion of  them  have  facilities  for  selling 
their  products  directly  to  retail  deal- 
ers or  are  interested  in  market- 
ing concerns  which  have  such  facilities. 
The  great  majority  of  the  refiners,  it  is 
true,  have  not  carried  integration  nearly  so 
so  far  as  the  Standard.  But  some  of  them, 
such  as  the  Pure  Oil  Co.,  the  Gulf  Refining 
Co.  (in  conjunction  with  the  J.  M.  Guffey 
Petroleum  Co.,  which  is  owned  by  the 
same  interests),  the  National  Refining  Co. 
of  Cleveland,  and  the  Union  Oil  Co.  of 
California,  have  developed  the  system  of 
integration  to  a  degree  approaching  that  of 
the  Standard  itself.  All  of  these  concerns 
have  pipe  lines,  refineries  and  local  market- 
ing facilities.  All  of  them  carry  the 


92 

elaboration  of  by-products  to  substantially 
the  most  complete  point  permitted  by  the 
character  of  the  crude  which  they  use.  All 
except  the  National  Refining  Co.  are  large 
producers  of  crude  oil.  All  of  them  own 
tank  cars  and  all,  except  the  National 
Refining  Co.,  own  tank  vessels.  Probably 
none  of  these  concerns  manufactures  the 
accessory  materials  of  refining,  packages, 
etc.,  to  any  such  extent  as  the  Standard  does, 
but  otherwise  their  system  of  integration 
is  nearly  as  complete  as  that  of  the 
Standard.  The  difference  between  them 
and  the  Standard  is  rather  in  the  volume 
of  business  than  in  its  comprehensiveness." 

The  testimony  shows  that  these  concerns  are 
as  a  rule  prosperous  and  growing.  As  an  illus- 
tration of  that  fact,  Petitioner's  Exhibit  371,  Vol. 
8,  Page  899,  shows  that  the  crude  oil  receipts  of 
the  Producers'  and  Refiners'  Oil  Co.,  associated 
with  the  Pure  Oil  Co.,  increased  from  1,321,572 
barrels  in  1900  to  2,771,384  barrels  in  1906  ;  that 
the  crude  oil  delivered  by  the  United  States  Pipe 
Line  Co.,  associated  with  the  Pure  Oil  Co.,  to  the 
refinery  of  the  latter  Company  at  Marcus  Hook 
which  began  operations  in  1904  increased  from 
223,000  barrels  in  that  year  to  733,000  barrels 
in  1906 ;  and  that  the  refined  oil  delivered  by 
the  United  States  Pipe  Line  Co.  from  interior 


93 

refineries  to  Marcus  Hook  increased  from  400,- 
ooo  barrels  in  1901  to  800,000  barrels  in  1906. 
Mr.  Tarbell,  who  is  connected  with  those  Com- 
panies, testified  that  their  business  had  been 
u  a  growing,  developing  and  expanding  busi- 
ness "  (Vol.  3,  p.  1451),  and  further  as  follows 
(Idem,  p.  1460)  : 

"  Q.  Mr.  Tarbell,  for  a  number  of  years  you 
have  lived  alongside  of  the  Standard  Oil  Co., 
have  you  not,  in  many  different  localities  in 
the  transaction  of  your  business?  A.  We 
are  in  a  number  of  points  where  they  are 
doing  business;  yes,  sir.  Q.  At  many 
points?  A.  Yes,  sir.  Q.  In  Europe  and 
in  this  country  ?  A.  Yes,  sir.  Q.  And  your 
business  is  growing?  A.  Yes,  sir.  Q.  And 
you  have  made  money  ?  A.  Yes,  sir.  Q. 
And  you  are  a  prosperous  concern?  A. 
Well,  I  think  we  are.  Q.  And  you  are  ex- 
panding and  developing  the  whole  time? 
A.  It  is  necessary  to  do  so  if  we  stay  in  the 
oil  business. 

These  conditions  are  utterly  inconsistent  with 
the  theory  of  a  monopoly.  They  demonstrate 
that  the  field  is  not  only  open  to  competitors, 
but  is  occupied  by  them.  The  extent  to  which 
they  participate  in  it  is  measured  only  by  their 
efforts  and  capital.  It  is  true  that  the  Standard 


94 

Has  done  a  large  percentage  of  the  business,  but 
that  is  because  of  its  long  life,  its  comprehensive 
efforts,  its  energy,  and  the  capital  it  has 
employed  and  risked.  That  percentage  has 
been,  however,  continually  decreasing  in  later 
years  as  others  have  engaged  in  the  business 
on  a  larger  and  more  comprehensive  scale.  What 
is  true  of  to-day  was  equally  applicable  to  past 
times  if  the  same  efforts  and  capital  had  been 
employed,  and  the  same  intelligence  shown  in 
adapting  those  efforts  to  modern  conditions. 
The  percentage  of  the  total  business  done  by  the 
Standard  will  doubtless  continue  to  decrease,  and 
the  causes  of  that  decrease  had  just  the  same 
opportunity  of  operation  in  the  past  as  in  the 
present.  The  volume  of  the  business  which 
any  concern  obtains  for  itself  is  de- 
pendent upon  its  activities  and  means. 
That  is  true  now,  and  always  has  been 
true.  It  is  true  of  the  volume  of  busi- 
ness that  has  been  done  by  the  Standard  and 
by  its  competitors.  It  was  the  most  intelli- 
gent, the  most  active,  the  best  equipped,  and  in 
the  highest  credit,  and  the  greatest  share  of  the 
business  fell  to  it.  But  that  is  not  monopoly, 
and  that  it  is  not  so  is  demonstrated  by  the  fact 


95 

that  as  others  have  approached  it  in  efficiency, 
capacity  and  means  they  have  shared  in  the 
business  correspondingly,  and  are  constantly 
sharing  in  it  to  a  greater  and  greater  extent. 

(7)  To  show  the  volume  of  the  Standard's 
business  is  the  object  of  Petitioner's  Exhibits 
376,  377  and  378  (Vol.  8,  Page  904).  Exhibit 
376  shows  that  the  runs  from  the  Standard, 
Tide- Water  and  Manhattan  pipe  lines,  compared 
with  the  total  production  of  crude  oil  in  the 
Pennsylvania  field,  were  in  the  year  1900,  92.9 
per  cent.;  in  1901,  92.9  per  cent.;  in  1902,  90.7 
per  cent.;  in  1903,  89.5  per  cent.;  in  1904,  88.7 
per  cent;  in  1905,  87.3  per  cent.,  and  in  1906, 
83.2  per  cent.,  which  is  a  decrease  of  nearly  10 
per  cent,  in  seven  years ;  and  that  the  percentages 
with  respect  to  the  Lima-Indiana  field  were  in  1900, 
92.9  per  cent.;  in  1901,  93.0  per  cent.;  in  1902, 
92.5  per  cent.;  in  1903,  92.4  per  cent;  in  1904, 
93.5  per  cent;  in  1905,  92.9  per  cent.,  and  in 
1906,  89.6  per  cent.  It  is  to  be  observed  as  to 
the  Lima-Indiana  field  that  it  has  been  largely 
left  to  the  Standard  for  the  reason  that  its  pro- 
duction, excepting  to  a  small  extent,  is  not  refin- 
able  by  the  ordinary  processes ;  and  that  the 
Standard  at  great  expense  developed  and  patented 
a  successful  process  for  its  utilization. 


96 

Exhibit  378  shows  that  the  proportions  of  the 
total  pipe  line  deliveries  to  the  Atlantic  sea-board 
of  the  Standard  and  Tide- Water  Pipe  Lines  from 
1900  to  the  year  1906,  were  as  follows  : 


Year. 

IQOO  . 

Per  cent. 

..Q7.  1 

Year. 

IQO4  . 

Per  cent. 

CK.7 

IQOI  . 

•y/ 

Q7.^ 

IQCK 

•  •  vo*/ 

CK  ^ 

I9O2 

966 

J-yv-'j  .  . 
1906 

;7  DO 

QZ  I 

IQOI.. 

...Q6.0 

These  figures  simply  show  that  during  the 
years  they  cover  the  Standard  and  Tide-Water 
Companies  refined  95  per  cent,  of  the  crude  oil 
refined  at  the  Atlantic  sea-board  if  the  amount 
of  crude  exported  and  the  amount  reaching  the 
seaboard  by  railroad  be  disregarded.  There  was 
no  reason  why  others  should  not  have  refined  at 
the  sea-board  as  the  Pure  Oil  Company  does. 

Exhibit  377  shows  during  the  same  years  the 
proportion  of  the  exports  of  illuminating  oil  by  the 
Standard  compared  with  the  total  exports,  as 
follows  : 


Year. 

TOOO 

Per  cent. 
90  8 

Year. 
1004.. 

Per  cent. 
..86.9 

TOOT 

QO.  ^ 

IQOS-. 

;7 
..87.9 

TOO2 

80.1 

IQO6  

..86.3 

IQOl.. 

^y'O 

...86.2 

-7 

97 

Here  again  we  have  a  decreasing  proportion. 

The  nse  of  naphtha  or  gasoline  has  greatly 
increased  during  the  last  ten  years,  so  that,  as 
appears  from  the  statistics  of  1904,  it  was  a  little 
over  one-half  of  the  quantity  of  illuminating  oil 
that  was  marketed.  It  is  a  more  valuable  pro- 
duct than  illuminating  oil  as  it  brings  a  much 
higher  price.  This  trade  is  another  instance  of 
the  increase  in  the  volume  of  the  business  of 
competitors  during  recent  years  as  it  has  grown 
from  eight  per  cent,  of  the  whole  in  1897  to  J3 
per  cent,  in  1906.  (Brief  on  Facts,  Vol.  III.,  p. 

535)- 

Another  instance  of  the  same  kind  is  furnished 

by  Defendant's  Exhibit  108  (Vol.  18,  p.  274), 
which  shows  the  number  of  tank  cars  in  use  in 
this  country  in  the  transportation  of  petroleum 
and  its  products  on  the  first  day  of  January  of 
each  year  of  the  years  1899,  1905  and  1908,  by 
the  Union  Tank  Line  Company  and  the  Waters- 
Pierce  Oil  Co.  (Standard  Companies),  and  by 
other  companies  and  railroads.  It  appears  that 
in  1899  the  Standard's  cars  were  62  per  cent,  of 
the  whole;  in  1905  they  had  decreased  to  52  per 
cent. ;  and  in  1908  they  had  further  decreased  to 
51  per  cent. ;  whilst  during  the  same  period  the 


98 

tank  cars  of  other  companies,  including  those 
owned  by  the  railroads  which  are  used  by  them, 
had  increased  from  38  per  cent,  of  the  whole  to 
49  per  cent.  To  express  the  matter  in  another 
way  the  Standard's  tank  cars  between  1899  an(^ 
1908  had  increased  171  per  cent.,  whilst  those  in 
use  by  others  had  increased  263  per  cent. ;  or 
the  tank  cars  used  by  the  Standard  Companies 
in  1899  were  60  per  cent,  more  than  those  in  use 
by  others  while  in  1908  they  were  only  four  per 
cent.  (Brief  on  Facts,  Vol.  II.,  p.  251). 

But  whatever  may  be  the  volume  of  the 
Standard's  business  it  is  due  to  the  size 
and  capacity  of  its  refineries,  their  geo- 
graphical distribution,  and  the  marketing 
facilities  that  it  has  provided  in  every  sec- 
tion of  this  country  and  throughout  the  world. 
It  is  not  due  to  any  restriction  of  the  employ- 
ment of  the  energies  and  capital  of  others  in 
the  business,  or  to  any  system  of  exclusive 
selling  to  the  trade.  There  is  no  evidence  that 
the  dealers  in  oil  have  ever  been  required  to  buy 
exclusively  from  the  Standard,  or  been  placed 
under  any  restrictive  contracts  or  arrange- 
ments respecting  the  source  of  their  supply. 
There  has  been  no  effort  at  any  time  to  control 


99 

the  market  by  any  such  means.  That  formid- 
able weapon  has  never  been  used  to  secure  an 
advantage  over  competitors,  and  had  the  Stand- 
ard men  ever  been  engaged  in  a  conspiracy  to 
"  crush  "  competition  by  excluding  competitors 
from  the  trade  it  would  have  been  used  because 
of  its  potency. 

It  is  claimed  that  the  extent  of  the  Standard's 
pipe  line  system  has  conduced  to  a  monopolistic 
control  of  the  business.  That  charge  we  have  al- 
ready answered.  Its  pipe  line  systems  have  been 
extended  from  time  to  time  as  new  oil  fields  were 
discovered  to  meet  its  own  needs  and  provide  its 
refineries  with  a  regular  and  adequate  supply  of 
crude  oil.  It  was  a  necessary  step,  and  as  legi- 
timate as  it  was  necessary.  Wherever  these  lines 
could  be  private  lines  that  was  and  is  their  char- 
acter, because  they  were  built  for  its  own  pur- 
poses. For  instance,  when  the  mid-continent 
field  showed  promise  of  great  development  the 
Prairie  Oil  and  Gas  Co.,  organized  by  the 
Standard,  by  an  expenditure  of  many  mil- 
lions of  dollars  built  its  own  private  line 
to  reach  those  fields  and  acquire  the  oil  for 
the  Standard's  refineries.  The  production  of 
those  fields  has  far  exceeded  the  consumption,  but 


100 

tankage  has  been  provided  at  a  cost  of  many 
more  millions  that  the  producers  might  have  an 
immediate  cash  market  for  their  oil.  But  the 
United  States  Pipe  Line  Company,  controlled  by 
the  Pure  Oil  Co. ,  also  has  its  pipe  line  to  the 
Atlantic  sea-board,  and  has  extended  its  trunk 
line  and  its  gathering  systems  into  Ohio,  and 
West  Virginia  to  reach  the  oil  in  those  fields. 
The  Texas  and  Gulf  Co.s  have  their  pipe  lines 
running  from  the  mid-continent  field  to  the  Gulf. 
What  those  Companies  did,  and  have  done, 
others  could  equally  well  have  done  wherever 
oil  is  produced  by  finding  capital  and  putting  it 
to  that  use. 

In  the  States  where  it  was  necessary  by  local 
laws  or  for  other  reasons  that  the  pipe  lines 
should  be  common  carriers  the  relation  of  any  one 
desiring  transportation  has  been  the  same  as  the 
relation  of  shippers  to  any  other  common  carrier. 
They  could  demand  reasonable  rates  and  enjoin 
unreasonable  rates.  Since  July,  1906,  they  have 
been  able,  under  the  Interstate  Commerce  Act, 
to  apply  to  the  Interstate  Commerce  Commission 
to  fix  the  rates  of  any  of  the  common  carrier  lines 
engaged  in  interstate  transportation,  but  no  one 
has  done  so. 


101 

The  claim  that  the  ownership  of  the  pipe 
line  systems  has  been  used  coercively  with  a 
monopolistic  effect  is  without  any  foundation. 
The  fact  is  that  from  an  early  day  pipe  lines 
have  been,  as  they  now  are,  an  absolutely  neces- 
sary adjunct  to  the  refining  business  on  a  large 
scale,  and  they  have  been  provided  by  the  Stand- 
ard to  meet  its  own  needs  for  a  sure,  regular 
and  adequate  supply  of  oil  for  its  refineries,  and 
not  as  a  weapon  of  coercion  or  control. 

(8)  It  is  further  charged   that  the  volume  of 
the   Standard's   business  has  been  due  to  rail- 
road rebates,  particular  contracts  in  restraint  of 
trade,  and  unfair  competitive  practices.     Those 
subjects  are  dealt  with  at  length  in  the  Brief  on 
the  Facts. 

(9)  It   is    also   charged    that    the   course   of 
prices    furnishes   evidence   tending   to   show   a 
monopoly.     That  charge  is  effectively  answered 
in  the  Brief  on  the  Facts  (Vol.  3,  pp.  539  et  seq.} 
where  it  is  shown  that  during  the   period  under 
examination  the  Standard's  prices  rose  less  than 
the  average  rise  in  general  comodities,  and  that, 
measured  by  the   purchasing  value   of   money, 
they  did  not  practically  rise  at  all.     Moreover 
the  constant  fluctuation  in  the  prices  from  year 


102 

to  year  is  the  strongest  evidence  that  they  were 
governed  by  economic  conditions  and  not  fixed  by 
arbitrary  will.  It  is  to  be  borne  in  mind  that 
there  may  be  a  natural  and  legitimate  influence 
or  power  over  prices  due  to  the  magnitude 
of  a  business,  and  that  inferences  may  not 
be  drawn  from  prices  in  favor  of  monopoly 
when  the  other  evidence  shows  that  the  magni- 
tude of  the  business  is  due  to  legitimate  acquisi- 
tion, growth  and  development,  and  not  to  the 
exclusion  of  others  from  the  business  by  re- 
strictive contracts  or  unlawful  or  coercive  methods. 
Obviously  the  controlling  and  fundamental  mat- 
ter is  whether  that  magnitude  is  a  growth  and 
development  along  lawful  and  legitimate  lines  : 
because  if  it  is  so  the  course  of  prices  is  quite 
immaterial. 

(10)  What  has  been  said  about  the  course  of 
prices  covers  the  charge  that  the  profits  of  the 
Company  have  been  excessive.  In  the  first  place 
the  profits  have  not  been  excessive  considering 
the  nature  and  hazards  of  the  business  ;  and  in 
the  next  place  if  the  evidence,  apart  from  profits, 
fails  to  show  that  the  magnitude  of  the  business 
is  monopolistic  the  fact  of  unusual  profits,  if  it 
existed,  does  not  convert  it  into  a  monopoly. 


103 

These  summaries  are  not  exhaustive,  and  do 
not  pretend  to  be  more  than  a  fair  statement  of 
the  more  material  facts  bearing  on  the  subjects 
they  cover. 


POINTS. 

(1)  The  common  ownership  of  the  Stand- 
ard properties  was  not  an  illegal  combina- 
tion or  conspiracy  at  the   time  the  Act  of 
1890  went  into  effect. 

(2)  The  Act  of  1890  did  not  by  its  terms 
or    reasonable    construction  convert  that 
common    ownership    into    an    illegal    and 
criminal  combination  in  restraint  of  trade. 

(3)  Congress  could    not    constitutionally 
convert    the    ownership  of  the  properties 
and  the  use  to  which  they  were  put  into  an 
illegal  and  criminal  combination  or  con- 
spiracy. 

(4)  Even  if  the  acquisitions  of  the  Stand- 
ard properties  and  their  common  owner- 
ship had   occurred   since  the   Act  of  1890 
went  into  effect  they  would  not  constitute 
an    illegal   and    criminal    combination   or 
conspiracy  within  the  Act. 


104 

(5)  The  acquisition   by  the   Standard  Oil 
Co.    (of    New    Jersey)    from    the    common 
owners  of  their  shares  in  the  so-called  sub- 
sidiary companies  was  not  an    illegal  and 
criminal    contract,    combination     or    con- 
spiracy within  the  Act  of  1890. 

(6)  There    is    no    monopolization    or    at- 
tempt to  monopolize. 

(7)  The  only  relief,   if  any,  that  can  be 
granted  is  to  enjoin  specific  acts,  contracts, 
or  methods  in  restraint  of  interstate  trade 
or  tending  to   its    monopolization    if   any 
such  are  found  to  exist. 

(8)  There  is  no  basis  in  the  proofs  for  a 
degree  affecting  the  international  trade  of 
the  Defendants. 

(9)  There  is  no  basis  in  the  proofs  for  a 
decree  severing  the  ownership  of  the  stocks 
of  the  pipe  line  companies. 

(10)  There  is  no  basis  in  the  proofs  for  a 
decree    affecting   the  Defendants   engaged 
in  the  natural  gas  business,  or  the  owner- 
ship of  their  stocks  by  the  Standard  Oil  Co. 
(of  New  Jersey). 


105 


POINT  I. 

The  common  ownership  of  the  Standard 
properties  •was  not  an  illegal  combination 
or  conspiracy  at  the  time  the  Act  of  1890 
went  into  effect. 

(i)  The  right  freely  to  buy  and  sell  property 
is  a  fundamental  civil  right  and  a  part  of  the 
liberty  of  the  individual  guarded  and  protected 
by  the  constitutional  guaranties,  both  national 
and  state.  It  is  indispensable  to  the  existence 
and  progress  of  civilization.  The  utmost  free- 
dom in  its  exercise  as  an  element  of  the 
broader  principle  of  liberty  of  contract  is  inher- 
ent in  our  social  and  industrial  system.  It  has 
never  been  limited  by  any  policy  of  encouraging 
or  protecting  competition.  There  has  never  been 
one  rule  with  respect  to  its  exercise  for  competi- 
tors in  business  and  another  for  non-competitors. 
No  such  classification  is  recognized  by  the  com- 
mon law.  The  right  to  buy  from  or  sell  to  a 
competitor  is  no  different  from  the  right  to  buy 
from  or  sell  to  a  non-competitor.  The  common 
law  furnishes  no  precedent  placing  any  restric- 
tion upon  the  right  of  competitors  to  buy  from 
and  sell  to  each  other  their  businesses  and  plants. 


106 

As  recently  as  Cincinnati  Packet  Co.  vs.  Bay 
(200  U.  S.,  179)  the  validity  of  a  sale  was  recog- 
nized though,  as  the  Court  said,  "  All  there  was 
to  sell  besides  certain  instruments  of  competition 
was  the  competition  itself." 

In  Trenton  Potteries  Co.  vs.  Oliphant,  58  N. 
J.  Eq.  507,524,  combinations  by  independent  and 
unconnected  traders  to  regulate  prices  or  pro- 
duction are  distinguished  from  purchases  of  the 
businesses  of  competitors,  and  in  regard  to  the 
latter  the  Court  said  : — 

"  A  person  engaged  in  any  manufacture 
or  trade,  having  the  right  to  acquire  and 
possess  property,  and  to  do  with  it  what 
he  chooses,  may  lawfully  buy  the  business 
of  any  of  his  competitors.  His  first  pur- 
chase would  at  once  diminish  competition.  If 
he  continued  to  purchase,  each  succeeding 
transaction  would  remove  another  competi- 
tor. If  his  capital  was  large  enough  to  en- 
able him  to  buy  the  business  of  all  compet- 
itors, the  last  purchase  would  completely 
exclude  competition,  at  least  for  a  time. 
But  in  the  absence  of  legislative  restrictions 
(if  such  could  be  imposed)  upon  the  acqui- 
sition of  such  property  and  its  use  when  so 
acquired,  courts  could  impose  no  limitation. 
They  would  be  obliged  to  enforce  such  con- 
tracts, notwithstanding  the  effect  was  to 
diminish  or  even  to  exclude  competition. 


107 

But  appellant  is  a  corporation  and  not  an 
individual.  Corporations,  however,  may 
lawfully  do  any  acts  within  the  corporate 
powers  conferred  on  them  by  legislative 
grant.  Under  our  liberal  corporation  laws, 
corporate  authority  may  be  acquired  by  ag- 
gregations of  individuals  organized  as  pre- 
scribed to  engage  in  and  carry  on  almost 
every  conceivable  manufacture  or  trade. 
Such  corporations  are  empowered  to  pur- 
chase, hold,  and  use  property  appropriate 
to  their  business.  They  may  also  pur- 
chase and  hold  the  stock  of  other  corpora- 
tions. Under  such  powers  it  is  obvious 
that  a  corporation  may  purchase  the  plant 
and  business  of  competing  individuals  and 
concerns.  The  legislature  might  have  with- 
held such  powers  or  imposed  limitations 
upon  their  use.  In  the  absence  of  prohi- 
bition or  limitation  on  their  powers  in  this 
respect,  it  is  impossible  for  the  courts  to 
pronounce  acts  done  under  legislative  grant 
to  be  inimical  to  public  policy.  The  grant 
of  the  legislature  authorizing  and  permitting 
such  acts  must  fix  for  the  courts  the  char- 
acter and  limit  of  public  policy  in  this  re- 
gard. It  follows  that  a  corporation  em- 
powered to  carry  on  a  particular  business 
may  lawfully  purchase  the  plant  and  busi- 
ness of  competitors,  although  such  purchases 
may  diminish  or,  for  a  time  at  least,  destroy 
competition.  Contracts  for  such  purchases 
cannot  be  refused  enforcement." 


108 

In  Diamond  Match  Co.  vs.  Roeber,  106  N.  Y., 
483,  it  was  said: 

"  We  are  not  aware  of  any  rule  of  law 
which  makes  the  motive  of  the  covenantee 
the  test  of  the  validity  of  such  a  contract. 
On  the  contrary,  we  suppose  a  party  may 
legally  purchase  the  trade  and  business  of 
another  for  the  very  purpose  of  preventing 
competition,  and  the  validity  of  the  contract, 
if  supported  by  a  consideration,  will  depend 
upon  its  reasonableness  as  between  the  par- 
ties. Combinations  between  producers  to 
limit  production  and  to  enhance  prices,  are 
or  may  be  unlawful,  but  they  stand  on  a 
different  footing." 

See,  also, 

In  re  Greene,  52  Fed.,  104. 

In  re  Corning,  51  Fed.,  210,  211. 

(2)  The  common  law  doctrine  respecting  con- 
tracts and  combinations  in  restraint  of  trade  does 
not  circumscribe  the  right  to  buy  and  sell ;  it 
concerns  only  executory  contracts  or  arrange- 
ments restricting  the  liberty  of  individuals  in 
the  pursuit  or  conduct  of  their  businesses. 
Its  underlying  conception  was  that  such  re- 
strictions could  be  carried  to  the  point  of 
contravening  a  sound  public  policy  with  respect 
to  the  freedom  of  the  individual  to  employ 


109 

his  energy  and  capital  in  trade,  and  the  freedom 
of  trade.  It  has  no  concern  with  compulsory 
competition  or  the  right  of  the  individual  to  re- 
tire from  a  trade  in  which  he  is  engaged  and 
sell  the  business  and  the  property  employed  in 
it  to  a  competitor.  It  leaves  competitors  free 
to  form  partnerships  and  thereby  combine  their 
energies,  resources  and  capital.  It  leaves  them 
free  to  form  corporations  and  unite  their 
energies,  resources  and  capital  in  that  mode  of 
organization.  It  does  not  deny  to  the  competitor 
who  wishes  to  retire  from  business,  or  who  from 
lack  of  ability,  ingenuity  or  enterprise,  is  fall- 
ing behind  in  the  competitive  race,  or  who  for 
any  other  reason  wishes  to  sell,  the  only  market 
for  his  business  by  prohibiting  him  from  selling 
it  to  those  engaged  in  the  same  business.  It  has 
never  sought  to  place  a  limit  on  the  expansion 
of  the  business  of  the  individual  or  the  corpora- 
tion either  by  employing  additional  capital  in 
enlarging  existing  plants,  or  building  new  ones, 
or  by  acquiring  existing  plants  from  others.  In 
leaving  free  the  right  to  buy  and  sell  the  common 
law  merely  expresses  the  faith  and  belief 
of  men  and  society  in  the  free  play  of  individual 


110 

effort  and  the  supreme  necessity  of  the  right  to 
industrial  progress. 

"  The  truth  is,"  said  Lord  Justice  BOWEN 
in  the  Mogul  Steamship  Case,  L.  R.,  23 
Q.  B.,  617,  "  that  the  combination  of  capital 
for  purposes  of  trade  and  competition,  is  a 
very  different  thing  from  such  a  combina- 
tion of  several  persons  against  one,  with  a 
view  to  harm  him,  as  falls  under  the  head  of 
an  indictable  conspiracy.  There  is  no  just 
cause  or  excuse  in  the  latter  class  of  cases. 
There  is  such  a  just  cause  or  excuse  in  the 
former.  There  are  cases  in  which  the  very 
fact  of  a  combination  is  evidence  of  a  design 
to  do  that  which  is  hurtful,  without  just 
cause, — is  evidence — to  use  a  technical  ex- 
pression— of  malice.  But  it  is  perfectly 
legitimate,  as  it  seems  to  me,  to 
combine  capital  for  all  the  mere  purposes 
of  trade  for  which  capital  may,  apart  from 
combination,  be  legitimately  used  in  trade. 
To  limit  combinations  of  capital,  when  used 
for  purposes  of  competition,  in  the  manner 
proposed  by  the  argument  of  the  plaintiffs, 
would,  in  the  present  day,  be  impossible — 
would  be  only  another  method  of  attempting 
to  set  boundaries  to  the  tides." 

(3)  The  scope  and  limits  of  the  common 
law  doctrine  are  clearly  shown  and  fixed  by 
the  cases  habitually  cited.  These  cases 
have  been  frequently  analyzed  by  the  courts, 


Ill 

particularly  in  the  opinions  of  HARLAN,  J.,  in 
U.  S.  vs.  E.  C.  Knight  Co.  (156  U.  S.,  p.  25 
et  seg.)  and  in  Northern  Securities  Co.  vs.  U.  S. 
(193  U.  S.,  pp.  339-342) ;  and  in  the  opinion  of 
TAFT,  J.,  in  U.  S.  vs.  Addystone  Pipe  and  Steel 
Co.  (84  Fed.,  pp.  288-292). 

The  leading  cases  are  Hilton  vs.  Eckersley  (6 
El.  &  BL,  47)  in  England  ;  and  in  this  country 
Morris  Run  Coal  Co.  vs.  Barclay  Coal  Co.  (68 
Pa.  St.,  173) ;  Salt  Co.  vs.  Guthrie  (35  Ohio  St., 
666) ;  Arnot  vs.  Pittston  &  Elmira  Coal  Co.  (68 
N.  Y.,  558);  Craft  vs.  McConoughy  (79 111.,  346) ; 
India  Bagging  Association  vs.  Kock  (14  La. 
Ann.,  1 68) ;  Vulcan  Powder  Co.  vs.  Hercules 
Powder  Co.  (96  Cal.,  510) ;  Oil  Co.  vs.  Adoue  (83 
Tex.,  650) ;  and  Chapin  vs.  Brown  (83  Iowa,  156). 
Many  other  cases  might  be  cited,  but  these  are 
typical  of  them  all,  and  a  reference  to  them  will 
sufficiently  indicate  the  nature  of  the  combina- 
tions which  have  been  held  to  be  in  restraint  of 
trade  or  contrary  to  public  policy  and  show  that 
they  do  not  include  purchases  of  competitive 
properties. 

Hilton  vs.  Eckersley  (6  El.  &  Bl.,  47)  was 
brought  upon  a  bond  signed  by  eighteen  Lanca- 
shire cotton  spinners  binding  them  severally  to 


112 

carry  on  their  businesses  with  respect  to  the 
wages  they  would  pay,  hours  of  labor  and  other 
matters,  according  to  the  regulations  of  the 
majority.  The  Court  of  Exchequer  Chamber 
held  that  the  bond  was  void,  because  in  restraint 
of  trade,  for  the  reason  that  "  each  man's  power 
of  carrying  on  his  trade  according  to  his  discre- 
tion for  his  own  best  advantage  "  was  restrained. 
(See  Stephens'  History  of  the  Criminal  Law  of 
England,  pp.  219,  220). 

Morris  Run  Coal  Co.  vs.  Barclay  Coal  Co.  (68 
Pa.  St.,  173),  was  an  agreement  between  five  in- 
dependent coal  companies,  controlling  the  pro- 
duction of  the  Blossburg  and  Barclay  mining 
regions  in  Pennsylvania,  empowering  a  com- 
mittee to  fix  prices  and  each  company's  propor- 
tion of  sales. 

Arnot  vs.  Pittston  and  Elmira  Coal  Co.  (68 
N.  Y.,  558),  was  an  agreement  between  two  in- 
dependent coal  companies  whereby  one  of  them, 
which  had  a  coal  depot  at  Elmira  which  was  the 
chief  market  for  coal  in  western  New  York,  pur- 
chased a  portion  of  the  product  of  the  other  and 
bound  it  not  to  sell  coal  to  any  other  party  to 
come  north  of  the  state  line  between  New  York 
State  and  Pennsylvania.  It  also  appeared  that 


113 

the  purchasing  company  had  similar  contracts 
with  all  the  other  mining  proprietors  in  the  same 
coal  region. 

Salt  Co.  vs.  Guthrie  (35  Ohio  St.,  666),  in- 
volved an  agreement  between  independent  manu- 
facturers in  a  salt  producing  territory  in  Ohio 
providing  for  a  committee  to  fix  the  prices  at 
which  all  of  them  should  sell  their  product. 

Craft  vs.  McConoughy  (79  111.,  346),  in- 
volved an  agreement  between  five  independent 
grain  dealers  in  Rochelle,  Illinois,  to  conduct 
their  business  as  if  independent  of  each  other, 
but  fixing  the  prices  at  which  they  would  sell 
and  dividing  the  profits  of  the  business  as  a 
whole  between  them  in  fixed  proportions. 

India  Bagging  Association  vs.  Kock  (14  La. 
Ann.,  1 68)  was  based  on  an  agreement  between 
eight  independent  commercial  firms  in  New 
Orleans  which  held  a  large  quantity  of  cotton 
bagging  providing  that  no  member  should  sell 
for  three  months  excepting  by  vote  of  the 
majority. 

Vulcan  Powder  Co.  vs.  Hercules  Powder 
Co.  (96  Cal.,  510)  involved  an  agreement 
between  four  independent  powder  companies 
of  California  providing  that  each  should  sell  at 


114 

prices  to  be  fixed  by  a  committee  of  their  repre- 
sentatives, and  pay  over  to  the  others  the  profits 
on  any  excess  of  sales  over  a  fixed  proportion  of 
the  total  sales. 

Oil  Co.  vs.  Adoue  (83  Tex.,  650)  was  based  on 
an  agreement  between  five  independent  owners 
of  cottonseed  oil  mills  in  Texas  that  they 
would  not  sell  at  less  than  certain  agreed  prices, 
and  whereby  one  of  them  guaranteed  to  the  other 
four  profits  to  a  stated  amount. 

Chapin  vs.  Brown  (83  la.,  156)  involved  an 
agreement  between  the  grocery  men  in  a  town 
not  to  buy  or  sell  any  butter  so  as  to  throw  the 
business  into  the  hands  of  one  man  who  dealt 
exclusively  in  butter. 

There  are  other  cases  concerning  agreements 
between  independent  companies  or  parties  en- 
gaged in  a  quasi-public  employment  fixing  prices 
and  dividing  or  pooling  the  business.  (Gibbs  vs. 
Gas  Co.,  130  U.  S.,  396;  Hooker  vs.  Vande- 
water,  4  Denio,  349 ;  Stan  ton  vs.  Allen,  5  Denio, 
434 ;  West  Va.  Transportation  Co.  vs.  Ohio 
River  Pipe  Line  Co.,  22  W.  Va.,  600.) 

These  cases  sufficiently  illustrate  the  doctrine 
of  the  common  law  although  in  some  of  them 
there  was  a  local  statute  denouncing  con- 


115 

spiracies  "  to  commit  any  act  injurious  to  trade 
or  commerce."  In  each  case  there  was  a  com- 
bination of  independent  competitive  manufac- 
turers or  dealers  in  the  form  of  an  executory 
agreement  regulating  prices,  production,  or  the 
conduct  of  the  business  of  each  in  other  particu- 
lars. The  essence  of  such  combinations  is  that 
the  parties  to  it  are  independent  competitive 
manufacturers  or  dealers,  and  that  restraint 
is  placed  upon  the  freedom  of  each  to  conduct 
his  own  business  with  respect  only  to  his  own 
interests  and  judgment.  Unless  these  essential 
elements  appear  the  doctrine  of  these  cases 
has  no  application.  Purchases  of  property, 
though  affecting  competition  in  uniting  prop- 
erties employed  in  the  same  business  which 
had  been  previously  separately  owned,  were  not 
involved,  and  are  neither  within  the  letter  or  the 
spirit  of  the  principle  of  these  cases. 

(4)  It  is  not  necessary  to  analyze  the  rule  of 
public  policy  on  which  these  cases  are 
based.  "  Public  policy,"  said  Lord  BROUGHAM, 
in  Egerton  vs.  Brownlow  (4  H.  L.  Cas.,  196)  "  is 
that  principle  of  the  law  which  holds  that  no 
subject  can  lawfully  do  that  which  has  a  tend- 
ency to  be  injurious  to  the  public  or  against  the 


116 

public  good.' '  "  If,"  said  Sir  GEORGE  JESSEL,  in 
Printing  Co.  vs.  Sampson  (19  L.  R.  Eq.  Cas.,  462) 
"  there  is  one  thing  more  than  any  other  which 
public  policy  requires,  it  is  that  men  of  full 
age  and  competent  understanding  shall  have 
the  utmost  liberty  of  contracting,  and  that  con- 
tracts, when  entered  into  freely  and  voluntarily, 
shall  be  held  good  and  shall  be  enforced  by 
Courts  of  Justice ".  Whenever  contracts  or 
transactions  are  questioned  as  injurious  to  the 
public  there  is  a  balancing  of  the  considerations 
bearing  on  liberty  of  contract  on  the  one  hand 
and  on  the  public  good  on  the  other,  out  of  which 
have  grown  certain  fixed  and  definite  rules  or 
determinations.  Amongst  them  is  this  rule  that 
combinations  or  contracts  between  independent 
manufacturers  or  dealers  regulating  their  busi- 
nesses and  restricting  each  in  the  conduct  of 
his  own  separately  owned  business  may  es- 
tablish such  a  control  of  the  market  as  to  be  in- 
jurious to  the  public  and,  thetefore,  the  courts 
will  not  enforce  them.  But  when  purchases 
are  made  of  competing  concerns  there  is  no 
continuance  of  the  previous  separate  owner- 
ship and  no  restriction  upon  the  conduct  of 
businesses  separately  owned.  The  purchaser 


117 

has  increased  his  productive  capacity  to  the 
extent  of  his  acquisitions,  but  neither  he 
nor  anyone  else  is  thereby  under  the  ban  of 
any  restrictions.  The  distinction  between  the 
two  situations  is  obvious  and  fundamental,  and 
it  is  the  reason  why  the  rule  with  respect  to 
combinations  does  not  apply  to  the  ownership  of 
various  properties  through  their  acquisition  and 
purchase  though  they  were  previously  employed 
in  competition.  The  title  to  property  thus  ac- 
quired passes,  and  with  it  the  complex  mass  of 
rights  called  ownership,  among  which  is  the 
right  to  use  it  for  the  purposes  for  which  it  is 
adapted.  There  is  no  authority  at  common  law 
for  invalidating,  limiting  or  impairing  rights  of 
ownership  in  property  so  acquired. 

(5)  But  it  will  no  doubt  be  argued  that  if 
acquisitions  originate  in  a  scheme  to  acquire 
practically  all  the  properties  or  plants  used 
in  a  business  with  a  view  to  restraining  trade 
or  controlling  the  market  it  is  an  illegal  com- 
bination at  common  law.  The  proposition, 
which  it  will  be  insisted  is  sustained  by  certain 
cases,  has  been  thus  formulated  :  "  An  agreement 
between  competitors  to  surrender  control  over 
their  properties,  and  transfer  them  to  one  and 


118 

the  same  corporation  or  organization,  where  each 
transfer  is  conditional  upon  a  similar  transfer 
by  each  of  the  other  competitors  and  parties 
to  the  arrangement,  and  where  the  considera- 
tion for  each  transfer  is  the  acquirement  of 
an  interest  by  the  seller  in  the  new  organization 
which  will  have  control  of  all  the  former  com- 
petitors, is  an  illegal  combination."  Whether 
this  is  a  sound  common  law  doctrine  we  need  not 
stop  to  discuss,  because  the  facts  of  this  case  do 
not  bring  it  within  its  range.  But  a  reference  to 
the  cases  will  be  useful  in  accentuating  the  pre- 
cise facts  which  were  involved  and  the  scope  of 
the  rule  they  apply. 

These  cases  are,  Richardson  vs.  Buhl,  77 
Mich.,  632;  People  vs.  North  River  Sugar  Re- 
fining Co.,  54  Hun,  354  ;  State  vs.  Standard  Oil 
Co.,  49  Ohio  St.,  137  ;  State  vs.  Distillery  Co., 
29  Neb.,  700 ;  Distilling  Co.  vs.  People,  156  111., 
448. 

In  Richardson  vs.  Buhl  (77  Mich. ,632),  it  was 
held  that  the  Diamond  Match  Company  which 
had  been  incorporated  for  the  purpose  of  manu- 
facturing and  dealing  in  friction  matches,  and 
acquiring  as  far  as  possible  all  the  plants  in  the 
United  States,  was  an  unlawful  body.  The  only 


119 

authorities  cited  are  cases  involving  contracts 
between,  or  combinations  of,  independent  pro- 
ducers regulating  prices  or  production.  It  is 
not  a  reasoned  determination  of  the  matter, 
and,  the  question  was  imported  into  the  case 
by  the  Court  on  its  own  motion,  in  connec- 
tion with  the  determination  of  a  collateral 
matter  between  individuals,  and  without  its 
being  raised  or  discussed  by  counsel,  or  the  pres- 
ence of  the  company  itself.  The  case  stands  by 
itself  and  is  in  direct  conflict  with  Trenton  Pot- 
teries Co.  vs.  Oliphant,  58  N.  J.  Eq.,  507  ;  Oak- 
dale  Co.  vs.  Garst,  18  R.  I.,  484;  State  vs.  Con- 
tinental Tobacco  Co.,  177  Mo.,  i  ;  In  re  Greene, 
52  Fed.,  104;  In  re  Corning,  51  Fed.,  210,  211. 
The  People  vs.  North  River  Sugar  Refining 
Co.,  54  Hun,  354,  was  a  case  of  a  combination 
of  separately  owned  and  competing  manufactur- 
ing concerns  in  the  form  of  a  trust.  It  was  held 
that  the  transfer  of  the  shares  of  the  company 
by  the  stockholders  to  the  trustees  of  the 
trnst  was  an  ultra  vires  and  unlawful  act  on 
the  part  of  the  corporation  warranting  its 
dissolution,  and  that  the  trust  in  tending  to 
monopoly  was  an  illegal  combination.  This  was 
not  a  case  of  sale,  but  a  pure  combination  be- 


120 

tween  independent  concerns  for  the  manage- 
ment and  control  of  their  separate  businesses 
as  a  whole  by  a  body  of  trustees.  The  Court 
of  Appeals  sustained  the  judgment  on  the  former 
ground  and  did  not  pass  on  the  question  of  the 
combination  as  a  monopoly.  (121  N.  Y.,  582). 

State  vs.  Standard  Oil  Co.  (49  Ohio  State,  137), 
was  determined  on  the  pleadings  consisting  of  the 
amended  petition,  the  answer  thereto,  and  the 
demurrer  of  the  State  to  the  answer.  These 
pleadings  are  given  in  the  report  of  the  case. 
There  is  no  averment  or  claim  in  the  amended 
petition  that  the  trust  agreement  was  a  combina- 
tion in  restraint  of  trade  or  tending  to  a  mon- 
opoly, or  in  any  way  raising  such  an  issue. 
What  was  claimed  is  shown  by  the  final  aver- 
ment, which  is  that  "  by  reason  of  defendant's 
stockholders,  directors  and  officers  signing 
and  entering  into  such  trust  agreements  and 
carrying  out  their  provisions  and  surrendering 
their  stock  in  defendant  and  accepting  in  lieu 
thereof  certificates  issued  by  the  nine  trustees 
aforesaid  and  permitting  the  corporate  powers, 
business  and  property  of  the  defendant  to  be 
exercised,  conducted  and  controlled  by  said 
trustees  in  manner  aforesaid,  and  by  reason  of 


121 

the  acts  and  omissions  of  the  defendant  herein 
before  recited,  said  defendant  has  forfeited 
its  corporate  rights,  privileges  powers  and 
franchises."  It  is,  however,  significant  that 
the  issue  of  a  combination  in  restraint  of  trade 
and  tending  to  a  monopoly  was  tendered  by  the 
original  petition  filed,  but  that  petition  was,  after 
the  denials  of  the  original  answer,  superseded 
by  the  amended  petition,  which  withdrew  such 
issue  from  the  case,  and  there  was  no  such  issue 
in  the  case  as  it  was  presented  to  the  Court. 
The  case  is  only  authority  for  the  proposition 
that  the  execution  of  the  trust  agreement  by  all 
of  the  stockholders  and  officers  of  the  Standard 
Oil  Co.  of  Ohio  was  a  corporate  act  on  its  part, 
and  as  such  ultra  vires  and  an  abuse  of  its  cor- 
porate powers.  The  case  did  not  at  all  involve 
the  legality  of  purchases  or  acquisitions  of  prop- 
erty on  the  theory  that  they  constituted  a  com- 
bination. 

In  The  State  vs.  Nebraska  Distillery  Com- 
pany (29  Neb.,  700),  there  was  under  considera- 
tion the  combination  of  independent  distillers 
known  as  the  Whiskey  Trust. 

In  The  Distilling  and  Cattle  Feeding  Co.  vs. 
The  People  (156  111.,  448),  it  was  held  that  this 


122 

combination  of  independent  distillers  known  as 
the  Whiskey  Trust  was  a  combination  in 
restraint  of  trade  and  tending  to  create  a  mo- 
nopoly, and  that  the  organization  of  the  defend- 
ant corporation  to  acquire  the  plants  of  the 
parties  to  the  trust  in  exchange  for  its  stock  as 
the  result  of  an  agreement  among  them  that  the 
corporation  should  be  organized  for  that  pur- 
pose did  not  purge  the  combination  of  its 
illegality. 

Eliminating  People  vs.  North  River  Sugar 
Refinery  (54  Hun,  354),  and  State  vs.  Dis- 
tilling Company  (29  Neb.,  700),  because  they 
involved  combinations  of  separate  and  inde- 
pendent concerns  for  the  management  of  their 
businesses  as  a  whole  by  an  outside  body  of 
trustees,  and  State  vs.  Standard  Oil  Co.  (49 
Ohio  St.,  137),  for  the  reasons  above  stated,  only 
Richardson  vs.  Buhl  (77  Mich.,  632),  and  Dis- 
tilling Company  vs.  People  (156  111.,  448),  re- 
main, and  of  these  it  is  the  doctrine  and  au- 
thority of  the  latter  case  with  which  we  have  to 
deal. 

(6)  The  ruling  of  that  case  precisely  stated  is, 
that  if  a  number  of  independent  manufacturers, 
representing  the  major  part  of  an  industry, 


123 

combine  to  form  a  trust  which  is  held  to 
be  an  illegal  combination  in  restraint  of 
trade,  and  thereupon  acting  together  they 
organize  a  corporation  to  take  over  their 
respective  properties  in  exchange  for  its  stock  as 
part  of  one  and  the  same  scheme,  the  combina- 
tion is  continued  in  the  corporation,  there  having 
been  merely  a  change  of  form.  It  is  not  neces- 
sary for  us  to  question  this  doctrine  as  it  has  no 
application  to  the  facts  presented  by  the  record 
in  this  case.  We  are  content  to  say  that  it 
will  bear  a  good  deal  of  examination  before  it  is 
finally  accepted.  It  is  a  new  departure  as  there 
is  a  real  distinction  between  a  combination  of  in- 
dependent concerns,  each  continuing  its  separate 
ownership,  restricting  the  freedom  of  each  in  the 
conduct  of  its  business,  and  the  obliteration  of  that 
ownership  in  the  transfer  of  the  separate  concerns 
to  a  new  corporation  with  its  own  stockholders  and 
their  common  ownership  of  the  whole  enterprise, 
considering  that  in  the  one  case  there  is  a  restraint 
upon  the  separately  owned  concerns  and  their 
management  and  operation,  whilst  in  the  other 
there  is  a  single  ownership  and  no  restraint  of 
any  kind.  The  rule  of  public  policy  respecting 
combinations  was  never  intended  to  restrict  the 


124 

right  of  sale  or  compel  the  continued  ownership 
of  property  by  an  individual  or  a  corporation. 

There  are  one  or  two  cases  of  the  same  char- 
acter as  the  Illinois  case,  but  it  is  not  necessary 
to  treat  them  separately. 

The  Northern  Securities  case  (U.  S.  vs.  North- 
ern Securities  Co.,  193  U.  S.,  197)  is  also  urged 
in  support  of  the  broad  proposition  that  the  ac- 
quisition of  competitive  plants  is  a  combination 
in  restraint  of  trade  at  common  law. 

The  Northern  Pacific  and  Great  Northern  Rail- 
road Companies  were  competitive  trans-conti- 
nental railroads,  each  with  its  own  stock  holders 
and  board  of  directors.  Neither  had  the  legal 
power  or  authority  to  acquire  the  other ;  in  fact, 
such  an  acquisition  was  prohibited.  Each  was 
bound,  so  far  as  the  other  and  the  public  were 
concerned,  to  maintain  its  separate  competi- 
tive existence.  To  bring  them  under  what 
would  be  practically  a  common  control  and  man- 
agement certain  leading  stockholders  of  each 
company  combined  together  to  organize  the 
Northern  Securities  Company  under  the  laws 
of  the  State  of  New  Jersey  and  to  exchange 
its  shares  at  fixed  ratios  for  the  shares  of  the  two 
companies.  This  was  held  to  be  a  combination  in 


125 

restraint  of  trade ;  the  organization  of  the  com- 
pany being  treated  as  a  mere  device  for  the  har- 
monious operation  of  both  roads  and  the  elimina- 
tion of  competition  between  them.  Mr.  Justice 
HARLAN  said  (p.  346).  "The  Securities  Company 
is  itself  a  part  of  the  present  combination,  its 
head  and  front  ;  its  trustee."  Mr.  Justice 
BREWER  said  (p.  362)  : 

"  The  transfer  of  stock  to  the  Securities 
Companies  was  a  mere  incident  of  the  man- 
ner in  which  the  combination  to  destroy 
competition  and  thus  unlawfully  restrain 
trade  was  carried  out." 

There  is  a  fundamental  difference  between 
such  a  combination  for  the  purpose  of  bring- 
ing these  competing  railroad  companies  under 
the  same  control  and  management  through 
the  medium  of  a  holding  company,  and  a 
purchase  of  competing  manufacturing  con- 
cerns. There  is  perhaps  some  analogy  between 
such  a  combination  and  the  facts  involved  in 
the  Illinois  case,  if  the  vital  difference  between  a 
manufacturing  or  trading  company  and  a  public 
service  corporation  is  disregarded.  There  was  in 
each  case  an  agreement  to  bring  independent 
concerns  under  the  same  management  through 


126 

the  medium  of  a  corporation  organized  for  that  ex- 
press purpose  ;  but  that  is  radically  different  from 
the  acquisition  by  an  existing  concern  through 
separate  transactions  of  other  concerns  in  the 
same  business  to  extend  the  sphere  of  its  opera- 
tions or  to  secure  a  greater  degree  of  necessary 
independence  in  vital  relations  of  the  industry, 
such  as  a  regular  and  adequate  supply  of  the 
raw  material.  On  this  difference  we  stand. 

The  same  distinction  applies  to  U.  S.  vs.  Ameri- 
can Tobacco  Co.  (164  Fed.,  700),  as  it  involved 
numerous  mergers  and  consolidations  of  separate 
and  independent  companies,  of  an  entirely  differ- 
ent character  and  nature  from  the  transactions  in- 
volved in  this  case. 

(7)  The  result  of  this  examination  and  review 
of  the  authorities  is  to  establish  the  proposition 
which  we  have  formulated  as  our  first  point. 
The  preceding  summary  of  facts  conclusively 
shows  that  there  was  no  common-law  com- 
bination or  conspiracy,  but  a  separate  pur- 
chase and  acquisition  of  plants  and  busi- 
nesses, for  a  consideration  fixed  in  each 
case  by  the  parties  to  the  transaction  in  the 
main  paid  in  cash,  but,  in  some  instances,  in 
whole  or  in  part,  in  shares  of  stock,  either  of  the 


127 

Standard  Oil  Co.  of  Ohio  or  of  the  company 
organized  to  take  over  the  business  acquired.  In 
some  instances  the  physical  property  was  bought 
and  transferred;  in  others  it  was  acquired 
through  the  transfer  of  the  stock  of  the  company 
which  owned  it.  The  transaction  was  substan- 
tially the  same  whichever  course  was  taken, 
because  what  was  being  acquired  was  the  prop- 
erty and  business  of  the  selling  concern.  The 
transactions  extended  over  a  period  of  years. 
They  had  their  specific  objects  or  purposes  ;  some 
to  refine  at  points  most  favorable  for  par- 
ticular territories ;  others  to  acquire  ware- 
house and  dock  facilities ;  others  to  diver- 
sify products ;  others  to  reach  new  markets ; 
others  to  assure  an  adequate  supply  of 
raw  material,  and  so  on.  It  was  a  development 
step  by  step  of  a  successful  institution  as  the 
means  at  its  command  enabled  it  to  extend  its 
operations  ;  and  not  a  scheme  or  plot  to  absorb 
a  growing  and  boundless  industry.  It  is  a  pure 
figment  of  the  imagination  that  three  or  four 
young  men  as  far  back  as  1870,  in  the  origins  of 
the  industry,  when  all  of  its  conditions  were  in 
a  state  of  demoralization,  conceived  the  idea  of 
appropriating  it  as  their  own  domain,  and  saw 


128 

in  their  dreams  what  has  come  to  pass  in  the 
vast  increase  in  space  and  quantity  of  the  oil 
production  and  the  world-wide  use  of  the  in- 
numerable products  of  petroleum.  The  antiquity 
of  the  alleged  conspiracy  is  alone  fatal  to  its 
serious  consideration.  The  sensible  view  is 
that  these  men  were  able,  alert,  intelligent, 
courageous  and  prudent ;  that  by  unremitting  in- 
dustry and  thorough  organization  they  made  the 
most  of  every  situation,  forecast  the  opportunities 
of  the  industry,  and  rapidly  adapted  their  efforts 
to  changing  conditions  ;  and  that  the  growth  and 
expansion  of  the  Standard  were  the  inevitable 
results  of  their  genius  and  enterprise.  No  doubt, 
in  some  instances,  men  who  were  also  successful 
in  the  business,  to  advance  their  own  interests, 
sold  to  them  and  united  with  them.  There  was 
no  law  preventing  them  from  doing  so,  as  once  a 
competitor  always  a  competitor  has  never  been, 
and  is  not  now,  a  maxim  of  legal  compulsion. 
In  many  instances,  no  doubt,  men  were  desirous 
of  selling  because  they  saw  that  to  conduct  the 
business  successfully,  with  the  changes  in  con- 
ditions from  time  to  time,  required  much  more 
capital  than  they  could  command,  and  that  it  was 
in  their  best  interest  to  sell.  It  would,  too,  be 


129 

folly  to  ignore  the  fact  that  in  a  business  char- 
acterized by  its  peculiar  conditions  and  hazards 
concentration  is  the  law  of  its  development.  It  is 
along  these  lines  that  the  growth  and  expansion 
of  the  Standard  Oil  Co.  finds  its  explanation,  and 
not  in  the  theory  of  a  combination  or  conspiracy 
that  is  iterated  and  reiterated  on  almost  every 
page  of  the  bill  in  this  case. 


POINT   II. 

The  Act  of  1890  did  not  by  its  terms 
or  reasonable  construction  convert  that 
common  ownership  into  an  illegal  and 
criminal  combination  in  restraint  of  trade 
under  Section  1  of  the  Act. 

(i)  In  July,  1890,  when  the  Act  went  into 
effect,  the  situation  was  that  the  Standard  Oil 
properties  were  held  in  an  undivided  common 
ownership.  The  owners  had  previously  trans- 
ferred the  legal  title  to  their  respective  interests 
to  nine  trustees,  who  then  held  it  in  trust  for 
them ;  but  they  were  the  real  owners.  It 
is  true  that  later  that  particular  trust  was  held 


130 

to  be  illegal,  partly  on  a  point  of  corporation 
law  and  partly,  though  the  question  was  not  in 
the  case,  on  the  ground  that  the  trust  was  an 
illegal  combination  because  composed  of  separate 
concerns  and,  therefore,  but  for  the  trust,  com- 
petitive, which  was  not  the  fact.  The  dissolu- 
tion of  the  trust  would  simply  eliminate  it 
without  disturbing  the  common  ownership. 
The  common  ownership  in  1882  and  1890 
is  not  disputable.  In  1890  the  properties 
consisted  of  refineries  employed  in  the  manu- 
facture of  a  great  many  different  products, 
but  principally  illuminating  oil  ;  of  private 
pipe  lines  to  gather  the  necessary  sup- 
ply of  crude  oil  at  the  various  oil 
fields  and  carry  it  to  the  refineries  ;  of 
certain  public  pipe  lines  open  to  the  use  of  pro- 
ducers and  refiners  generally,  but  not,  for  the 
reasons  which  have  been  stated,  used  by  them  ; 
and  marketing  facilities  in  various  parts  of  this 
and  foreign  countries.  The  properties  were 
operated  as  a  single,  unified  business  and  an 
organic  whole.  Their  product  was  sold  partly 
in  intrastate  and  partly  in  interstate  and  foreign 
trade. 


131 

The  ownership  of  the  refining  properties  and 
the  manufacturing  of  the  products  were  not  sub- 
ject to  the  jurisdiction  of  Congress  (U.  S.  vs.  E.  C. 
Knight  Co.,  156  U.  S.,  i).  The  intrastate  trade 
was  not  subject  to  its  jurisdiction  (Addy stone 
Pipe  Co.  vs.  U.  S.,  21 1).  The  same  is  true  of  the 
private  pipe  lines.  Only  the  interstate  and 
foreign  trade  and  the  interstate  transportation  of 
the  common  carrier  pipe  lines,  to  the  extent  that 
there  was  any,  were  subject  to  its  jurisdiction, 
and  the  parts  of  the  business  on  which  the 
Act  of  1890  bore.  There  was  no  existing 
combination  with  respect  to  those  parts  as  they 
were  merely  an  incident  of  the  ownership  of  the 
manufacturing  properties  and  a  part  of  the  pipe 
line  properties.  If  there  were  then  any  out- 
standing contracts  with  other  parties  restraining 
interstate  or  foreign  trade  the  operation  of  the 
Act  would  be  to  denounce  them  and  make  their 
further  performance  illegal.  But  the  common 
ownership  of  the  properties  and  their  operation 
for  the  purposes  to  which  they  were  adapted  as 
a  unit  was  a  legal  situation  which  was  not 
affected  by  the  Act. 

(2)  Even  if  Congress  had  the  power,  it  did 
not  seek  or  attempt  by  the  first  section  of  the 


132 

Act  to  denounce  as  illegal  previous  acquisitions 
of  competitive  properties  or  disturb  existing 
titles  or  rights  of  ownership.  Had  it  sought  to 
do  so  appropriate  and  explicit  language  would 
have  been  used.  There  is  no  such  language. 
The  phrases  "  contract,  combination  or  con- 
spiracy in  restraint  of  trade "  are  not  appro- 
priate for  that  purpose.  Those  phrases  were 
well  known  and  had  a  settled  legal  significance. 
They  were  contracts  or  combinations  of  an 
executory  nature  restricting  the  liberty  of  the 
parties  or  others  in  the  conduct  of  their  busi- 
nesses to  the  injury  of  the  public.  They  did 
not,  in  any  way,  involve  executed  transfers  of 
property  or  their  incidental  rights  of  ownership. 
It  was  against  such  executory  contracts,  com- 
binations and  conspiracies  that  the  Act  of  1890 
was  directed.  This  is  borne  out  by  the  conditions 
out  of  which  the  legislation  grew.  The  period  of 
ten  years  or  so  prior  to  the  passage  of  the  Act 
had  been  marked  by  combinations  of  independent 
competitive  concerns ;  some  of  them  on  a  very 
large  scale.  These  combinations  took  different 
forms.  There  were  agreements  creating  a  sell- 
ing agency  or  a  central  committee  to  regulate 
production  and  fix  prices.  There  were  associations 


133 

of  independent  and  competing  manufacturers 
and  merchants  to  maintain  prices  by  means  of  the 
commercial  boycott.  Boards  of  trustees  were 
created  to  hold  the  legal  title  of  the  stocks 
of  independent  and  competing  corporations 
to  secure  co-operation  as  to  production  and  prices. 
Speaking  generally  it  may  be  said  that  every 
method  for  combining  competitive  concerns  for  the 
regulation  of  production  and  prices  was  adopted 
that  human  ingenuity  could  devise.  These  com- 
binations were  deemed  to  be  injurious  to  the  pub- 
lic, and  the  purpose  of  the  first  section  of  the 
Act  was  to  denounce  and  prohibit  them.  That 
purpose  was  accomplished  without  any  interfer- 
ence with  executed  transfers  of  property  or  ex- 
isting rights  of  ownership. 

(3)  The  case  nearest  in  its  facts  to  this  case 
arose  in  1892  and  was  the  occasion  of  a  profound 
consideration  of  the  Act  of  1890  by  the  late  Mr. 
Justice  JACKSON,  then  a  Circuit  Judge.  We  refer 
to  In  Re  Greene  (52  Fed.,  104).  It  grew  out  of 
an  indictment  in  Massachusetts  of  a  number  of 
individuals  who  were  the  principal  persons  con- 
nected with  the  Distilling  &  Cattle  Feeding  Co., 
organized  in  the  year  February  n,  1890,  under 
the  laws  of  Illinois.  It  was  averred  that  the  Com- 


134 

pany  had  as  it  appears  prior  to  the  passage  of 
the  Act  obtained  control  by  purchase,  renting 
and  leasing  of  70  distilleries  within  the  United 
States  used  for  the  manufacture  of  distillery  prod- 
ucts ;  that  each  of  the  distilleries  was  when  ac- 
quired a  separate  and  competing  concern ;  and 
that  by  means  of  this  ownership  and  control  the 
Company  manufactured  75%  of  the  distillery  pro- 
ducts and  monopolized  the  interstate  trade  and 
commerce  therein.  It  was  further  averred  that  the 
Company,  to  maintain  its  monopoly,  had  agreed 
with  various  dealers  in  Massachusetts  to  pay  re- 
bates on  condition  that  they  bought  exclusively 
from  the  Company.  The  Defendant,  who  was  held 
under  a  warrant  awaiting  an  order  for  his  removal 
to  the  district  of  Massachusetts  to  answer 
the  indictment,  applied  for  a  writ  of  habeas  corpus, 
which  application  Judge  JACKSON  granted,  hold- 
ing that  the  Act  of  1890  did  not  intend  to  de- 
clare that  the  acquisition  and  ownership  of  these 
properties  with  the  control  of  the  trade  that  it 
gave  was  an  offence  under  the  Act.  The  pertinent 
portions  of  the  opinion  are  quoted  under  a  later 
head  of  this  brief.  This  case  has  been  frequently 
cited,  and  we  are  not  aware  that  its  doctrine  has 
been  authoritatively  disapproved  or  its  author- 


135 

ity  impaired.  It  is  claimed  that  the  decision  in 
the  Northern  Securities  case  has  that  effect,  but 
the  fundamental  differences  which  distinguish 
them  rebut  that  contention  as  we  have  already 
shown. 

(4)  An  analysis  of  the  decisions  of  the  Su- 
preme Court  of  the  United  States  under  the 
Act  of  1890  confirms  our  position  under  this 
point. 

(a)  United  States  vs.  E.  C.  Knight  Co.  (156 
U.  S.,  i)  held  that  an  acquisition  of  sugar  re- 
fineries in  the  State  of  Pennsylvania  by  the 
American  Sugar  Refining  Co.,  which  owned  a 
large  majority  of  the  sugar  refineries  in  the 
United  States  giving  it  a  practical  control  of 
the  business,  was  not  within  the  Act  of  1890  ; 
that  it  bore  no  direct  relation  to  commerce  be- 
tween the  States  though  the  intention  was  to 
sell  the  product  throughout  the  States;  that 
manufacturing  is  not  commerce  ;  and  that  it  did 
not  follow  that  an  "  attempt  to  monopolize,  or 
the  actual  monopoly  of  the  manufacture,  was  an 
attempt,  whether  executory  or  consummated,  to 
monopolize  commerce,  even  though,  in  order  to 
dispose  of  the  product  the  instrumentality  of 
commerce  was  necessarily  invoked." 


136 

(b)  United   States   vs.    Trans-Missouri   Asso- 
ciation (166  U.  S.,  290)  and   United   States   vs. 
Joint   Traffic  Association  (171   U.  S.,  505)  held 
that   a   combination  between  a  large  number  of 
railroad  companies  creating  a  body  or  committee 
to  fix   rates    was   a   combination  in  restraint  of 
trade   within   the   meaning   of    the    Act.     The 
agreement    between    the    companies    restricted 
their   power    of   fixing   their   own  rates  by  its 
delegation  in  a  measurable  degree  to  an  outside 
body,  and  it   was  a  restriction  vitally  affecting 
the  interests  of  the  public. 

(c)  Hopkins  vs.  United  States  (171  U.  S.,  578) 
and  Anderson  vs.  United  States  (171  U.  S.,  604) 
held  that  the  restrictive  rules   of   certain   live 
stock  exchanges  related  to  a  business  that  only 
incidentally   affected  interstate  commerce;    and 
that   the   Act  only  applies  to  agreements   and 
combinations    directly    restraining    such    com- 
merce. 

(d)  Addystone  Pipe  &  Steel  Co.  vs.  United 
States  (175   U.  S.,  211)  was  a  combination  be- 
tween    independent    competing    manufacturers 
providing   machinery   and    methods   for   fixing 
prices  in  such  a  way  as  to  enhance  them  in  a 
very  aggravated  form. 


137 

(e)  Montague  vs.  Lowry  (193  U.  S.,  38)  was  a 
combination  of  manufacturers  and  dealers  in 
tiles,  mantels  and  grates  for  the  purpose  of  regu- 
lating the  trade  in  those  articles  in  California 
in  various  particulars,  including  prices,  and 
establishing  a  commercial  boycott  on  manufac- 
turers and  dealers  who  did  not  become  members 
of  the  association  and  submit  to  its  regulations. 

(/)  Northern  Securities  vs.  United  States  (193 
U.  S.,  197)  was  a  combination  of  the  principal 
stockholders  of  two  parallel  and  competing  trans- 
continental railway  systems  to  establish  a  com- 
mon control  and  eliminate  competition  by  means 
of  a  holding  company. 

(g)  Swift  vs.  United  States  (196  U.  S.,  375) 
involved  a  combination  of  independent  concerns 
for  the  conduct  of  the  business  of  each  in 
certain  specified  particulars  calculated  and  in- 
tended to  monopolize  the  trade.  The  injunction 
which  issued  was  based  on  the  bill,  as  the  defend- 
ants stood  on  their  demurrer  which  was  over- 
ruled. 

(h)  Cincinnati  Packet  Co.  vs.  Bay  (200  U.  S., 
179)  held  that  a  covenant  not  to  engage  in  the 
shipping  business  between  certain  points  for  a 
period  of  five  years,  and  to  maintain  rates  be- 


138 

yond  one  of  the  points,  in  connection  with  a  sale 
of  vessels,  was  not  a  violation  of  the  Act. 

(z)  Loewe  vs.  Lawler  (208  U.  S.,  274)  held 
that  a  combination  of  labor  organizations  to  boy- 
cott the  interstate  trade  of  a  manufacturer  was 
a  conspiracy  in  restraint  of  trade  within  the 
Act. 

To  these  cases  may  be  added  In  Re  Debs  (158 
U.  S.,  564),  which  practically  held  that  the 
physical  obstruction  of  interstate  transportation 
by  labor  associations  was  a  conspiracy  in  re- 
straint of  trade  within  the  Act. 

All  these  cases,  in  which  the  Act  was  held 
to  be  applicable,  involved  combinations  in 
the  common  law  sense  affecting  interstate 
commerce  ;  some  by  restrictions  imposed 
on  the  members  of  the  combination  ;  others 
by  restrictions  or  acts  limiting  or  destroying 
the  activities  of  parties  outside  of  the  com- 
bination ;  and  they  declare  no  doctrine  which 
denounces  such  an  acquisition  and  ownership  of 
previously  competing  properties  as  appears  in 
this  case.  If  that  acquisition  and  ownership  are 
to  be  brought  within  the  Act  it  will  be  only  by 
a  radically  new  interpretation  and  application. 


139 


POINT  III. 

Congress  could  not  constitutionally  con- 
vert the  ownership  of  the  properties  and 
the  use  to  which  they  were  put  into  an 
illegal  and  criminal  combination  or  con- 
spiracy. 

The  acquisitions  of  the  properties  vio- 
lated no  law  when  they  occurred,  and  the 
title  of  the  common  owners  was  a  valid, 
legal  title.  No  principle  of  the  common  law 
invalidated  titles  or  ownership  even  if  acquired 
in  connection  with  contracts  or  combinations 
in  restraint  of  trade.  The  right  to  own  the 
properties  involved  the  right  to  use  and  en- 
joy them.  "  Congress  has  not  the  power  or 
authority  under  the  commerce  clause,  or  any 
other  provision  of  the  Constitution,  to  limit  and 
restrict  the  right  of  corporations  created  by  the 
States  or  the  citizens  of  the  States  in  the  acquisi- 
tion, control  and  disposition  of  property  "  (In  re 
Greene,  52  Fed.,  104).  The  Chief  Justice  said 
in  United  States  vs.  E.  C.  Knight  Co.  (156 
U.  S.,  i,  p.  1 6)  that  "  Congress  did  not  at- 
tempt to  make  criminal  the  acts  of  persons 
in  the  acquisition  and  control  of  property 


140 

which  the  States  of  their  residence  or  creation 
sanctioned  or  permitted,"  because  "  it  was  in  the 
light  of  well  settled  principles  that  the  Act  of 
July  2d,  1890,  was  framed/'  plainly  implying 
that  it  was  beyond  the  power  of  Congress  to 
make  such  acts  criminal  or  declare  them  illegal. 
Judge  JACKSON  also  said  in  the  Greene  case  that 
"  in  construing  and  applying  the  provions  of  the 
Act  to  the  specific  offenses  charged  it  must  be 
assumed  that  Congress  did  not  intend  to  make 
the  enactment  either  retroactive  or  give  it  an  ex 
post  facto  operation  or  effect,"  and  the  basis  of 
such  an  assumption  was  the  lack  of  power  to  do 
so  as  applied  to  the  previous  acquisition  and 
ownership  of  distilleries  in  such  number  as  to 
control  the  trade  and  commerce  in  their  products 
which  appeared  in  that  case.  It  is  really  too 
plain  for  argument  that  Congress  was  without 
the  power  to  declare  the  acquisition  and  owner- 
ship of  the  properties  in  question  unlawful  or  a 
criminal  offense,  and  compel  directly  or  indi- 
rectly the  disintegration  of  that  ownership. 
So,  also,  it  is  not  within  the  power  of  Con- 
gress to  disturb  the  ownership  or  prevent 
the  use  of  manufacturing  property  simply  be- 
cause the  product  becomes  the  subject  of 


141 

interstate  or  commerce.  If,  however,  when  the 
product  becomes  the  subject  of  interstate  trade 
or  commerce  acts  are  done,  or  agreements  are 
made,  with  respect  to  it  in  that  relation  that  are 
in  restraint  of  trade,  it  is  within  the  power  of 
Cougress  to  denounce  those  acts  and  agreements 
and  empower  the  Courts  to  retrain  them.  That, 
we  submit,  is  the  power  which  it  exercised  in  the 
passage  of  this  Act. 


POINT  IV. 

Even  if  the  acquisitions  of  the  Standard 
properties  and  their  common  ownership 
had  occurred  since  the  Act  of  1890  went 
into  effect  they  would  not  constitute  an 
illegal  and  criminal  combination  or  con- 
spiracy within  the  Act. 

The  tendency  of  the  cases  is  to  sustain  the 
position  that  the  first  section  of  the  Act  of 
1890  is  directed  at  combinations  of  independent 
concerns  for  the  regulation  of  production  and 
prices  whatever  their  form,  and  no  more  sought 
to  affect  or  restrict  the  right  of  purchase  or 
acquisition  than  did  the  common  law.  This 
appears  not  only  from  what  has  been  judicially 


142 

declared  to  be  the  object  and  purposes  of  the 
Act,  but  in  what  has  been  said  as  to  transactions 
which  are  not  within  its  scope. 

In  one  of  the  earliest  cases  (1892),  In  re  Corn- 
ing (51  Fed.,  205),  RICKS,  J.,  said  (pp.  211-212) : 

"  From  those  debates  (in  Congress)  it  is 
evident  that  the  Congress  did  not  intend  to 
limit  the  amount  of  capital  a  citizen  should 
invest  in  any  line  of  business  or  restrain 
his  energy  or  enterprise  in  acquiring  for 
himself  all  the  trade  possible  in  such  busi- 
ness, provided  in  doing  so  he  did  not  by 
illegal  contracts  or  devices  restrain  others 
from  pursuing  the  same  business,  or  de- 
prive the  public  from  enjoying  the  advan- 
tages of  a  free  use  of  capital,  skill  and  ex- 
perience of  competitors." 

In  the  exhaustive  examination  of  the  act  by 
Mr.  Justice  JACKSON,  not  long  after  its  passage, 
in  Re  Greene  (52  Fed.,  104),  he  said: 

"  The  enactment  was  manifestly  aimed  at 
the  trust  combinations  and  associations 
formed  by  individuals  and  corporations 
which  the  State  Courts  have  in  most  in- 
stances declared  illegal." 

And  further  (pp.  66,  67) : 

"  Congress  may  place  restrictions  and 
limitations  upon  the  right  of  corporations 


143 

created  and  organized  under  its  authority  to 
acquire,  use  and  dispose  of  property.  It  may 
also  impose  such  restrictions  and  limitations 
upon  the  citizen  in  respect  to  the  exercise  of 
a  public  privilege  or  franchise  conferred  by 
the  United  States.  But  Congress  certainly 
has  not  the  power  or  authority  under  the 
Commerce  Clause  or  any  other  provision  of 
the  Constitution  to  limit  and  restrict  the 
right  of  corporations  created  by  the  states 
or  the  citizens  of  the  states  in  the  acquisi- 
tion, control  and  disposition  of  property. 
.  .  .  It  is  equally  clear  that  Congress 
has  no  jurisdiction  over  and  cannot  make 
criminal  the  aims,  purposes  and  intentions 
of  persons  in  the  acquisition  and  control  of 
property  which  the  states  of  their  residence 
or  creation  sanction  and  permit. " 

In  U.  S.  vs.  E.  C.  Knight   Co.  (156  U.  S.,  i) 
it  was  said  (p.  16)  : 

"  It  was  in  the  light  of  well  settled  prin- 
ciples that  the  act  of  July  2,  1890,  was 
framed.  Congress  did  not  attempt  to  assert 
the  power  to  deal  with  monopoly  directly  as 
such  ;  or  to  limit  and  restrict  the  rights  of 
corporations  created  by  the  States  or  the 
citizens  of  the  States  in  the  acquisition, 
control,  or  disposition  of  property  ;  or  to 
regulate  or  prescribe  the  price  or  prices  at 
which  such  property  or  the  products  thereof 
should  be  sold  ;  or  to  make  criminal  the 


144 

acts  of  persons  in  the  acquisition  and  con- 
trol of  property  which  the  State  of  their 
residence  or  creation  sanctioned  or  per- 
mitted. Aside  from  the  provisions  ap- 
plicable where  Congress  might  exercise 
municipal  power,  what  the  law  struck  at 
was  combination,  contracts,  and  conspiracies 
to  monopolize  trade  and  commerce  among 
the  several  States  or  with  foreign  nations. 
.  .  .  The  subject  matter  of  the  sale 
was  shares  of  manufacturing  stock,  and  the 
relief  sought  was  the  surrender  of  property 
which  had  already  passed  and  the  sup- 
pression of  the  alleged  monopoly  in  manu- 
facture by  the  restoration  of  the  status  quo 
before  the  transfers  ;  yet  the  act  of  Con- 
gress only  authorized  the  Circuit  Courts  to 
proceed  by  way  of  preventing  and  restrain- 
ing violations  of  the  act  in  respect  of  con- 
tracts, combinations,  or  conspiracies  in  re- 
straint of  interstate  or  international  trade 
or  commerce. " 

In  U.  S.  vs.  Trans-Missouri  Freight  Associa- 
tion (166  U-  S.,  290)  it  was  said,  in  the  opinion 
of  the  Court  with  reference  to  contracts  speci- 
fically designated  at  common  law,  "  contracts  in 
restraint  of  trade  "  (p.  329)  : 

"  A  contract  which  is  the  mere  accom- 
paniment of  the  sale  of  property  and  thus 
entered  into  for  the  purpose  of  enhancing 


145 

the  price  at  which,  the  vendor  sells  it,  which 
in  effect  is  collateral  to  such  sale  and  where 
the  main  purpose  of  the  whole  contract  is 
accomplished  by  such  sale,  might  not  be 
included  within  the  letter  or  spirit  of  the 
statute  in  question." 

There  is  no  intimation  in  this  saving  clause 
of  the  opinion  that  sales  themselves  of  property 
employed  in  a  business  from  one  competitor  to 
another  are  or  may  be  in  restraint  of  trade. 

In  U.  S.  vs.  The  Joint  Traffic  Association  (171 
U.  S.,  505),  it  was  said  (pp.  567-568)  : 

"  As  examples  of  the  kinds  of  contracts 
which  are  rendered  illegal  by  this  construc- 
tion of  the  act,  the  learned  counsel  suggests 
all  organizations  of  mechanics  engaged  in 
the  same  business  for  the  purpose  of  limit- 
ing the  number  of  persons  employed  in  the 
business,  or  of  maintaining  wages  ;  the  for- 
mation of  a  corporation  to  carry  on  any  par- 
ticular line  of  business  by  those  already  en- 
gaged therein  ;  a  contract  of  partnership  or 
of  employment  between  two  persons  previ- 
ously engaged  in  the  same  line  of  business  ; 
the  appointment  by  two  producers  of  the 
same  person  to  sell  their  goods  on  commis- 
sion ;  the  purchase  by  one  wholesale  mer- 
chant of  the  product  of  two  producers  ;  the 
lease  or  purchase  by  a  farmer,  manufacturer 
or  merchant  of  an  additional  farm,  manufac- 


146 

tory  or  shop  ;  the  withdrawal  from  business 
of  any  farmer,  merchant  or  manufacturer  ; 
a  sale  of  the  goodwill  of  a  business  with  an 
agreement  not  to  destroy  its  value  by  en- 
gaging in  similar  business  ;  and  a  covenant 
in  a  deed  restricting  the  use  of  real  estate. 
It  is  added  that  the  effect  of  most  business 
contracts  or  combinations  is  to  restrain 
trade  in  some  degree.  This  makes  quite  a 
formidable  list.  It  will  be  observed,  how- 
ever, that  no  contract  of  the  nature 
above  described  is  now  before  the  court,  and 
and  there  is  some  embarrassment  in  assum- 
ing to  decide  herein  just  how  far  the  Act 
goes  in  the  direction  claimed.  Neverthe- 
less, we  might  say  that  the  formation  of 
corporations  for  business  or  manufacturing 
purposes  has  never,  to  our  knowledge,  been 
regarded  in  the  nature  of  a  contract  in  re- 
straint of  trade  or  commerce.  The  same 
may  be  said  of  the  contract  of  partnership. 
It  might  also  be  difficult  to  show  that  the 
appointment  by  two  or  more  producers  of 
the  same  person  to  sell  their  goods  on  com- 
mission was  a  matter  in  any  degree  in  re- 
straint of  trade.  We  are  not  aware  that  it 
has  ever  been  claimed  that  a  lease  or  pur- 
chase by  a  farmer,  manufacturer  or  mer- 
chant of  an  additional  farm,  manufactory  or 
shop,  or  the  withdrawal  from  business  of 
any  farmer,  merchant  or  manufacturer,  re- 
strained commerce  or  trade  within  any  legal 
definition  of  that  term ;  and  the  sale  of  a 


147 

good-will  of  a  business  with  an  accompany- 
ing agreement  not  to  engage  in  a  similar 
business  was  instanced  in  the  Trans- 
Missouri  case  as  a  contract  not  within  the 
meaning  of  the  act ;  and  it  was  said  that 
such  a  contract  was  collateral  to  the  main 
contract  of  sale  and  was  entered  into  for  the 
purpose  of  enhancing  the  price  at  which  the 
vendor  sells  his  business.' ' 

The  view  thus  expressed  excludes  from  the 
operation  of  the  Act  a  vast  mass  of  transactions 
which  interfere  with  competition.  "  Interference 
with  competition  "  and  "  restraint  of  trade"  can- 
not therefore  be  convertible  terms  though  they 
are  too  often  assumed  to  be  so.  If  a  part- 
nership is  formed  which  combines  the  energies 
and  resources  of  two  or  three  or  more 
competitors  in  the  same  business  there  is  an 
interference  with  competition,  but  not,  as  the 
Court  says,  a  restraint  of  trade.  So,  if  a 
corporation  is  formed  which  acquires  property 
and  plants  employed  in  a  business  which  have 
been  competitive  there  is  an  interference  with 
competition,  but  again,  not  a  restraint  of  trade. 
It  would  seem  to  be  a  necessary  conclusion  that 
confusion  results  from  identifying  too  closely 
acts  interfering  with  competition  with  acts  re- 


148 

straining  trade.  This  has  led  to  all  the  cur- 
rent motions  about  competition  being  the  one 
vital  matter  determining  whether  acts  are  in 
restraint  of  trade  or  not.  What  the  phrase 
"  combination  in  restraint  of  trade "  really  in- 
volves is  a  restriction  of  the  freedom  of  action 
of  the  parties  to  the  contract  or  combination  or 
others  in  the  control,  management  or  conduct 
of  their  respective  businesses.  Combinations 
and  agreements  which  do  not  involve  such  re- 
strictions are  not  combinations  or  agreements 
in  restraint  of  trade,  although  they  may  incident- 
ally interfere  with  competition.  This  is  borne 
out  by  the  exclusion  of  transactions  of  the  kind 
mentioned  by  Mr.  Justice  PECKHAM  from  the 
operation  of  the  Act  although  they  unques- 
tionably interfere  with  competition. 

In  Robinson  vs.  Suburban  Brick  Co.  (127 
Fed.,  804),  and  A.  Booth  &  Co.  vs.  Davis  (127 
Fed.,  875),  a  covenant  in  a  contract  for  the  sale 
of  the  property  of  a  competitor  restricting  the 
vendor  from  engaging  in  the  business  was  held 
to  be  valid. 

In  the  case  last  cited  it  is  said  (p.  878)  : 

"  The   transaction    by    which    the   com- 
plainant acquired  the  title  and  interest  for 


149 

which  it  seeks  protection  in  this  cause  was 
an  out  and  out  purchase  of  the  vendor  cor- 
poration's property  and  good  will,  and  of  the 
ancillary  agreement  of  its  stockholders,  the 
breach  of  which  agreement  is  the  gravamen 
of  the  complainant's  case.  That  such  a 
transaction  is  lawful  seems  clear.  In  U.  S. 
v.  Addyston  Pipe  &  Steel  Co.  (85  Fed.,  271- 
281)  Judge  TAFT  considers  the  question 
here  involved,  and  in  a  forcible  opinion 
demonstrates  that  agreements  by  the  seller 
of  property  or  business  not  to  compete  with 
the  buyer  in  such  a  way  as  to  impair  the 
business  sold  are  perfectly  valid. " 

In  Cincinnati  Packet  Co.  vs.  Bay  (200  U.  S., 
179  it  was  said  : 

"  Presumably  all  there  was  to  sell  besides 
certain  instruments  of  competition  was  the 
competition  itself,  and  the  purchasers  did 
not  want  the  vendors  name." 

In   Smiley   vs.  Kansas  (196  U.  S.,  447)  it  was 
said  (p.  356) : 

"  Undoubtedly  there  is  a  certain  freedom 
of  contract  which  cannot  be  destroyed  by 
legislative  enactment.  In  pursuance  of  that 
freedom  parties  may  seek  to  further  their 
business  interests,  and  it  may  not  be  always 
easy  to  draw  the  line  between  those  con- 
tracts which  are  beyond  the  reach  of  the 
police  power  and  those  which  are  subject  to 


150 

prohibition  or  restraint.  But  a  secret  ar- 
rangement by  which,  under  penalties,  an 
apparently  existing  competition  among  all 
the  dealers  in  a  community  is  one  of  the 
necessaries  of  life  is  substantially  destroyed, 
without  any  merging  of  interests  through 
partnership  or  incorporation,  is  one  to  which 
the  police  power  extends." 


POINT   V. 

The  acquisition  by  the  Standard  Oil  Co. 
(of  New  Jersey)  from  the  common  owners 
of  their  shares  in  the  so-called  subsidiary 
companies  was  not  an  illegal  and  criminal 
contract,  combination  or  conspiracy  within 
the  Act  of  1890. 

(i)  There  is  no  combination  under  the  Act 
unless  one  is  formed  which  restrains  trade,  that 
is,  which  restricts  the  freedom  of  competitors 
in  carrying  on  their  respective  businesses. 
In  1899  all  the  Standard  Oil  properties 
were  held  in  a  common  ownership,  and  that 
common  ownership  had  existed  from  the  time 
of  the  acquisition  of  every  property  acquired,  and 
in  all  subsequent  extensions,  developments  and 


15J 

expansions  as  they  occurred.  All  the  properties 
were  acquired  for  the  individuals  who  were 
stockholders  of  the  Standard  Oil  Company  of 
Ohio.  The  stockholders  of  that  company  be- 
came the  holders  of  the  trustees'  certificates, 
and  the  certificate  holders,  through  the  conver- 
sion of  their  certificates  into  the  shares  of  the 
twenty  companies  and  the  exchange  of  those 
shares  for  the  shares  of  the  Standard  Oil  Com- 
pany of  New  Jersey,  one  of  their  own  corpora- 
tions, became  the  stockholders  of  the  Standard 
Oil  Company  of  New  Jersey,  and  as  such,  the 
owners  in  precisely  the  same  proportion  of  all 
the  properties  as  they  had  been  as  certificate 
holders  and  as  stockholders  of  the  Standard  Oil 
Company  of  Ohio.  There  has  never  been  any 
separate  ownership  of  any  of  the  properties  since 
their  acquisition.  Every  owner  has  all  along  been 
the  owner  of  his  same  proportionate  share  in  all 
the  properties  and  companies  corresponding 
first  to  his  stock  ownership  in  the  Standard  Oil 
Company  of  Ohio,  then  to  his  certificate  owner- 
ship, and  now  to  his  stock  ownership  in  the 
Standard  Oil  Company  of  New  Jersey.  When 
these  properties  and  companies  were  owned  by  or 
held  for  the  stockholders  of  the  Standard  Oil 


152 

Company  of  Ohio  there  was  no  competitive  rela- 
tion between  them  in  the  sense  in  which  that 
term  is  used  when  there  is  under  consideration 
whether  a  certain  transaction  or  combination  is 
in  restraint  of  trade.  Properties,  plants  and 
companies  owned  by  the  same  persons  in  a  com- 
mon ownership  are  not  independent  or  com- 
petitive from  the  point  of  view  of  the  Act  of 
1890. 

(2)  When  the  so-called  trust  of  1882  was 
formed  there  was  no  union  or  fusion  of  competi- 
tive properties  and  companies.  The  trust  was 
not  formed  for  any  reason  or  purpose  hav- 
ing any  relation  to  competition  or  the  suppres- 
sion of  competition.  Prior  to  its  formation  the 
managers  of  every  separate  concern  were  the 
appointees  of  the  common  owners,  and  the 
concerns  were  operated  and  managed  in  the 
interest  of  the  common  ownership.  The 
owners,  through  the  medium  of  the  trust, 
selected  nine  of  their  number  to  act  for  them  in 
selecting  these  officers  and  managers,  which  did 
not  in  any  way  change  their  ownership  or  affiect 
the  relations  of  the  concerns  to  each  other.  The 
motive  for  the  creation  of  the  trust  was  that  each 
owner  might  have  in  the  trust  certificates  a  con- 
venient and  usable  evidence  of  his  interest. 


153 

(3)  When  the  trust  was  dissolved  there  was  no 
change  of  ownership,  and  no  change  in  the  rela- 
tion of  the  separate  concerns  to  each  other.    The 
same  owners  selected  the  officers  and  managers 
of   the  concerns.      When   the  shares   were  ex- 
changed for  shares  of  the  Standard  Oil  Company 
(of  New  Jersey)  there    was  again  no  change  of 
ownership.     If   twenty   men    own    a    twentieth 
interest  in  each  of  twenty  corporations  represented 
by  a  twentieth  of  the  shares  in  each  corporation, 
no  real  change  of  ownership   is  worked  by  the 
transfer  of  all  of  their  shares  to  one  of  the  cor- 
porations in  exchange  for  an  equivalent  number 
of  its  shares.     As  owners  each  of   one-twentieth 
of  the  shares  of  the  one  company  their  ownership 
is  just  the  same  as  when   they  each  owned  one- 
twentieth  of  the  shares  of  each  of  the  companies. 
The   indisputable   and  controlling  fact   is  that 
there  was  no  competitive  relation  between  the 
concerns  after  their   original  acquisition  thirty 
years  ago  and  more. 

(4)  Under  these  circumstances  we  submit  that 
the  transfer  of  the  shares  of  the  various  com- 
panies  for   their   equivalent    in    shares   of   the 
Standard  Oil  Company  (of  New  Jersey),  which 
represented    precisely   the   pre-existing   propor- 


154 

tionate  interests  in  the  common  property,  was 
not  a  combination  in  restraint  of  trade  within 
the  meaning  of  the  Act  of  1890. 


POINT  VI. 

There  is  no  monopolization   or  attempt 
to  monopolize. 

(i)  On  pages  84,  85,  and  86  of  the  Bill  it  is 
alleged  that  the  Standard  Oil  trust  during  the 
period  from  1882  to  1899  and  the  Standard  Oil 
Company  since  1889,  and  their  various  subsidiary 
corporations  and  the  individual  defendants 
named,  acting  through  both  the  trust  and 
said  corporations,  have  monopolized  the  oil 
business  by  means  not  only  of  the  various  al 
leged  combinations  constituting  the  acquisition 
of  the  properties,  but  by  certain  additional 
means,  the  allegations  respecting  which  are  set 
forth  in  the  sub-divisions  of  the  Bill  from  and 
including  sub-division  6  to  and  including  sub- 
division 28.  We  have  so  far  dealt  with  the  ac- 
quisition and  ownership  of  the  Standard  prop- 
erties and  have  shown  that  they  did  not  con- 


155 

stitute  a  combination  in  restraint  of  trade.  The 
common  ownership  itself,  therefore,  does  not 
constitute  a  monopoly.  We  now  proceed  to  con- 
sider the  remaining  allegations  respecting  the 
monopolization  of  the  trade. 

This  proceeding  was  begun  in  December, 
1906.  It  was  instituted  under  Section  4  of 
the  Act  of  1890  which  authorizes  proceed- 
ings in  equity  "  to  prevent  and  restrain  viola- 
tions of  this  Act."  There  would  be  no  existing 
violation  of  the  Act  to  restrain  unless  the  de- 
fendants, when  the  proceeding  was  begun, 
monopolized  or  were  attempting  to  monopolize 
the  oil  business.  Whether  that  condition  ex- 
isted is  the  subject  matter  of  this  point ;  and 
first  we  have  to  ascertain  what  is  a  monopoly  or 
monopolization  within  the  Act. 

(2)  There  has  as  yet  been  no  authoritative  defi- 
nition by  the  Supreme  Court  of  what  constitutes 
a  monopoly  within  the  meaning  of  the  Act  of 
1890.  There  have  been  references  to  the  term, 
but  they  do  not  furnish  an  authoritative  defini- 
tion. Though  it  has  been  prominent  in  public  dis- 
cussion in  recent  years  it  has  generally  seemed 
sufficient  to  use  it  without  attaching  any  specific 
meaning  to  it,  and  more  as  a  term  of  reproach 


156 

than  as  a  specific  legal  or  economic  conception. 
It  is  not  uncommon  to  hear  size  in  and  of  itself 
treated  as  monopoly.  According  to  that  view 
there  is  a  point  at  which  growth  and  expansion, 
however  legitimate,  become  illegal  and  criminal. 
However  convenient  that  use  of  the  term  may 
be  for  popular  purposes  it  is  not  its  legal  mean- 
ing or  signification.  At  common  law  a  monop- 
oly had  a  precise  definition  ;  it  was  "  a  license 
or  privilege  allowed  by  the  King  for  the  sole 
buying  and  selling,  making,  working  or  using 
of  anything  whatsoever  whereby  the  subject  in 
general  is  restrained  from  that  liberty  of  manu- 
facturing or  trading  which  he  had  before  " 
(Blackstone,  Vol.  4,  p.  160).  It  is  said  that  in 
modern  legislation  and  judicial  usage  it  has  a 
broader  application  than  that  of  an  exclusive 
right  based  on  a  grant.  Just  what  it  means  in 
that  broader  use  of  the  term  is  the  point  to  be 
determined.  A  governmental  grant,  as  in  the 
case  of  a  patent  monopoly,  it  is  said,  is  no  longer 
necessary,  and  that  may  be  assumed  to  be  true. 
But  monopoly  still  imports  the  idea  of  exclusive- 
ness,  and  an  exclusiveness  existing  by  virtue 
of  a  restraint  of  the  liberty  of  others. 
It  may  be  a  practical  as  distinguished  from 


157 

a  theoretical  or  complete  exclusiveness,  but 
that  does  not  eliminate  trie  restraint  of  others 
as  the  essential  element.  With  the  common  law 
monopoly  that  restraint  resulted  from  the  grant 
of  the  exclusive  right  or  privilege.  There 
must  be  some  substitute  for  the  grant  as  a 
source  of  the  restraint  essential  to  the  condition 
of  exclusiveness  which  constitutes  monopoly. 
Conceivable  sources  are  contracts,  combinations 
and  conspiracies  excluding  individuals  and  capital 
on  a  comprehensive  scale  and  in  an  effective  degree 
from  participation  in  a  particular  business.  What- 
ever the  magnitude  of  a  single  concern  may  be 
and  whatever  the  volume  of  the  business  there 
may  be  in  its  hands,  it  is  not,  we  submit,  a 
monopoly  unless  "  the  subject  in  general  is  re- 
strained from  that  liberty  of  manufacturing  or 
trading  which  he  had  before  ",  by  definite  and 
assignable  restrictive  contractual  obligations,  well 
known  as  contracts  in  restraint  of  trade,  combina- 
tions affecting  the  liberty  of  their  members  or 
constraining  that  of  outsiders,  or  conspiracies  to 
injure,  curtail  or  destroy  the  business  of  others 
of  a  criminal  or  tortious  character  at  common 
law,  or  other  unlawful  or  tortious  acts  having 
that  effect.  These  very  general  observations  are 


158 

offered  as  an  introduction  to  what  has  been  said 
on  the  subject  in  cases  which  have  arisen  under 
the  Act  of  1890. 

(3)  In   American    Biscuit   &  Manf'g  Co.    vs. 
Klotz,  44  Fed.,  p.  724,  it  was  said/^r  Curiam: 

"  In  construing  the  federal  and  state 
statutes,  we  exclude  from  consideration  all 
monopolies  which  exist  by  legislative  grant ; 
for  we  think  the  word  l  monopolize '  cannot 
be  intended  to  be  used  with  reference  to  the 
acquisition  of  exclusive  rights  under  gevern- 
ment  concession,  but  that  the  lawmaker  has 
used  the  word  to  mean  ( to  aggregate '  or  '  con- 
centrate '  in  the  hands  of  few,  practically, 
and,  as  a  matter  of  fact,  and  according  to  the 
known  results  of  human  actions,  to  the  ex- 
clusion of  others  ;  to  accomplish  this  end  by 
what,  in  popular  language,  is  expressed  in 
the  word  '  pooling',  which  may  be  defined 
to  be  an  aggregation  of  property  or  capital 
belonging  to  different  persons,  with  a  view 
to  common  liabilities  and  profits.  The  ex- 
pression in  each  law  '  combination  in  the 
form  of  trusts'  would  seem  to  point  to  just 
what,  in  popular  language,  is  meant  by 
pooling.  .  .  . 

In  re  Corning  (51  Fed.,  205),  RICKS,  J.,  said: 

"  It  is  not  averred  that,  when  defendants 
purchased  their  70  distilleries,  they  ob- 


159 

ligated  the  vendors  not  to  build  other  dis- 
tilleries, or  not  to  continue  in  the  distillery 
business  in  the  future.  It  is  not  averred 
that  defendants  attempted  in  any  way  to 
bind  the  vendors  to  withhold  their  capital 
or  skill  or  experience  in  the  business  from 
the  public  in  the  future.  There  is  no  aver- 
ment that  the  defendants  in  any  manner,  or 
at  any  time,  attempted  to  control  the  busi- 
ness of  the  remaining  one-fourth  of  the  dis- 
tilleries in  the  United  States,  or  in  any  way 
attempted  to  limit  their  output,  or  by  agree- 
ment with  them  control  the  price  at  which 
their  product  should  be  sold,  or  in  any  de- 
gree restrained  their  trade,  or  limit  the  ter- 
ritory over  which  their  trade  should  extend. 
The  full  scope  of  the  averments  in  this  re- 
spect is  that  before  this  law  was  passed  by 
Congress  the  defendants  legally  purchased 
with  their  own  capital  three-fourths  of  the 
distilleries  in  the  United  States,  and  that 
they  produced  77,000,000  gallons  of  dis- 
tillery products,  and  sold  these  products  in 
the  markets  of  the  several  states  at  the  best 
possible  prices  ;  and  that  they  continued  so 
to  own  and  operate  said  distilleries,  and  so 
to  sell  their  products,  after  the  passage  of 
this  Act.  This  they  did  without  any  at- 
tempt at  any  time,  by  contract,  to  control 
the  production  of  the  other  distilleries,  or 
the  prices  at  which  they  should  sell,  or 
without  any  contract  with  such  distillers  in 
any  way  restraining  trade.  The  indict- 


160 

ment,  therefore,  in  my  judgment,  wholly 
fails  to  charge  a  crime,  so  far  as  the  pur- 
chase of  said  distilleries  or  their  manu- 
facture of  distilled  products  before  the 
passage  of  the  Act  is  concerned,  or 
so  far  as  they  are  charged  with  continuity 
to  own  and  operate  them  with  unlawful  in- 
tent after  the  passage  of  the  Act.  *  *  * 
From  these  debates  (in  Congress)  it  is  evi- 
dent that  the  Congress  did  not  intend  to 
limit  the  amount  of  capital  a  citizen  should 
invest  in  any  line  of  business,  or  restrain 
his  energy  or  enterprise  in  acquiring  for 
himself  all  the  trade  possible  in  such  busi- 
ness, provided  in  doing  so  he  did  not,  by 
illegal  contracts  or  devices,  restrain  others 
from  pursuing  the  same  business,  or  de- 
prive the  public  from  enjo3'ing  the  advan- 
tages of  the  free  use  of  capital,  skill  and 
experience  of  competitors.7' 

In  re  Greene  (52  Fed.,  104)  (1892),  JACKSON, 
Circuit  Judge,  said  (p.  115) : 

"  It  is  not  very  clear  what  Congress 
meant  by  the  second  section  of  the  Act  of 
July  2,  1890,  in  declaring  it  a  misdemeanor 
to  t  monopolize,'  or  '  attempt  to  monopo- 
lize,' any  part  of  the  trade  or  commerce 
among  the  states  or  with  foreign  nations. 
It  is  very  certain  that  Congress 
could  not,  and  did  not,  by  this  enact- 
ment, attempt  to  prescribe  limits  to  the 


161 

acquisition,  either  by  the  private  citizen  or 
state  corporation,  of  property  which  might 
become  the  subject  of  interstate  commerce, 
or  declare  that,  when  the  accumulation  or 
control  of  property  by  legitimate  means 
and  lawful  methods  reached  such  magni- 
tude or  proportions  as  enabled  the  owner  or 
owners  to  control  the  traffic  therein,  or  any 
part  thereof,  among  the  states,  a  criminal 
offense  was  committed  by  such  owner  or 
owners.  All  persons,  individually  or  in 
corporate  organizations,  carrying  on  busi- 
ness avocations  and  enterprises  involving 
the  purchase,  sale,  or  exchange  of  articles, 
or  the  production  and  manufacture  of  com- 
modities, which  form  the  subjects  of  com- 
merce, will,  in  a  popular  sense,  monopolize 
both  state  and  interstate  traffic  in  such  ar- 
ticles or  commodities  just  in  proportion  as 
the  owner's  business  is  increased,  enlarged, 
and  developed.  But  the  magnitude  of  a 
party's  business,  production,  or  manufac- 
ture, with  the  incidental  and  indirect  powers 
thereby  acquired,  and  with  the  purpose  of 
regulating  prices  and  controlling  interstate 
traffic  in  the  articles  or  commodities  form- 
ing the  subject  of  such  business,  produc- 
tion, or  manufacture,  is  not  the  monopoly, 
or  attempt  to  monopolize,  which  the  statute 
condemns. 

"  A  '  monopoly/  in  the  prohibited  sense, 
involves  the  element  of  an  exclusive  privi- 
lege or  grant  which  restrained  others  from 


162 

the  exercise  of  a  right  or  liberty  which  they 
had  before  the  monopoly  was  secured.  In 
commercial  law,  it  is  the  abuse  of  free  com- 
merce, by  which  one  or  more  individuals 
have  procured  the  advantage  of  selling  alone 
or  exclusively  all  of  a  particular  kind  of 
merchandise  or  commodity  to  the  detriment 
of  the  public.  As  defined  by  Blackstone  (4 
Bl.  Comm.,  159),  and  by  Lord  COKE  (3  Co. 
Inst,  181),  it  is  a  grant  from  the  sovereign 
power  of  the  state  by  commission,  letters 
patent  or  otherwise,  to  any  person  or  corpo- 
ration, by  which  the  exclusive  right  of 
buying,  selling,  making,  working  or  using 
anything  is  given.  When  this  section  of 
the  Act  was  under  consideration  in  the 
Senate,  distinguished  members  of  the  judi- 
ciary committee  and  lawyers  of  great  ability 
explained  what  they  understood  the  term 
(  monopoly  '  to  mean  ;  one  of  them  say- 
ing :  *  It  is  the  sole  engrossing  to 
a  man's  self  by  means  which  prevent 
other  men  from  engaging  in  fair  com- 
petition with  him.'  Another  senator  defined 
the  term  in  the  language  of  Webster's  dic- 
tionary :  '  To  engross  or  obtain,  by  any 
means,  the  exclusive  right  of,  especially  the 
right  of  trading,  to  any  place  or  with  any 
country,  or  district ;  as  to  monopolize  the 
India  or  Levant  trade.'  It  will  be  noticed 
that,  in  all  the  foregoing  definitions  of 
'  monopoly  ',  there  is  embraced  two  leading 
elements,  viz.,  an  exclusive  right  or  privi- 


163 

lege,  on  the  one  side,  and  a  restriction 
or  restraint  on  the  other,  which  will  operate 
to  prevent  the  exercise  of  a  right  or  liberty 
open  to  the  public  before  the  monopoly  was 
secured.  This  being,  as  we  think,  the 
general  meaning  of  the  term,  as  employed 
in  the  second  section  of  the  statute,  an 
*  attempt  to  monopolize  '  any  part  of  the 
trade  or  commerce  among  the  states  must 
be  an  attempt  to  secure  or  acquire  an  exclu- 
sive right  in  such  trade  or  commerce  by 
means  which  prevent  or  restrain  others 
from  engaging  therein.  It  was  certainly 
not  a  *  monopoly ',  in  the  legal  sense  of 
the  term,  for  the  accused  or  the  Distilling 
&  Cattle  Feeding  Company  to  own  70  dis- 
tilleries, and  the  products  thereof,  whether 
such  products  amounted  to  the  whole  or  a 
large  part  of  what  was  produced  in  the 
country.  Their  ownership  and  control  of 
such  products,  as  subjects  of  trade  and  com- 
merce, is  not  what  the  statute  condemns,  but 
the  monopoly  or  attempt  to  monopolize  the 
interstate  trade  or  commerce  therein.  In 
this  acquisition  and  operation  of  the  70  dis- 
tilleries, which  enabled  the  accused  or  said 
Distilling  &  Cattle  Feeding  Company  to 
manufacture  and  control  the  sale  of  75  per 
cent,  of  the  distillery  products  of  the  coun- 
try, it  does  not  appear,  nor  is  it  alleged,  that 
the  persons  from  whom  said  distilleries  were 
acquired  were  placed  under  any  restraint,  by 
contract  or  otherwise,  which  prevented  them 


164 

from  continuing  or  re-engaging  in  such 
business.  All  other  persons  who  chose  to 
engage  therein  were  at  liberty  to  do  so.  The 
effort  to  control  the  production  and  manu- 
facture of  distillery  products,  by  the  enlarge- 
ment and  extension  of  business,  was  not  an 
attempt  to  monopolize  trade  and  commerce 
in  such  products  within  the  meaning  of  the 
statute,  and  may  therefore  be  left  out  of  fur- 
ther consideration." 

In  U.  S.  vs.  Trans-Missouri  Freight  Associa- 
tion (58  Fed.,  58),  SANBORN,  Circuit  Judge,  said 
(p.  82)? 

"  A  monopoly  of  trade  embraces  two  es- 
sential elements  :  (i)  The  acquisition  of  an 
exclusive  right  to,  or  the  exclusive  control 
of,  that  trade  ;  and  (2)  The  exclusion  of  all 
others  from  that  right  and  control." 

In  Northern  Securities  Co.  vs.  The  United 
States  (193  U.  S.,  197),  Mr.  Justice  HOLMES  in 
his  opinion  said  (p.  409)  : 

"  I  repeat,  that  in  my  opinion,  there  is  no 
attempt  to  monopolize,  and  what,  as  I  have 
said,  in  my  judgment  amounts  to  the  same 
thing,  that  there  is  no  combination  in  re- 
straint of  trade,  until  something  is  done 
with  the  intent  to  exclude  strangers  to  the 
combination  from  competing  with  it  in  some 
part  of  the  business  which  it  carries  on." 


165 

In  Whitwell  vs.  Continental  Tobacco  Co. 
(125  Fed.,  454),  it  was  said,  by  SANBORN,  Circuit 
Judge  (p.  462)  : 

"  The  Supreme  Court  has  declared  that 
the  true  construction  of  the  first  section  is 
that  no  contract,  combination,  or  conspiracy 
is  denounced  by  it  unless  its  necessary  effect 
is  to  directly  and  substantially  restrict  com- 
petition in  commerce  among  the  states.  By 
a  parity  of  reasoning,  the  correct  interpreta- 
tion of  the  second  section  must  be  that  no 
attempt  to  monopolize  a  part  of  commerce 
among  the  states  is  made  illegal  or  punish- 
able by  the  provisions  of  that  section  unless 
the  necessary  effect  of  that  attempt  is  to 
directly  and  substantially  restrict  commerce 
among  the  states.  The  acts  of  the  defend- 
ants had  no  such  effect.  They  evidenced 
nothing  but  the  legitimate  efforts  of  traders 
to  secure  for  themselves  as  large  a  part  of 
interstate  trade  as  possible,  while  they  left 
their  competitors  free  to  do  the  same.  It  was 
not — it  could  not  have  been — the  purpose 
or  the  effect  of  the  second  section  of  this 
law  to  prohibit  or  to  punish  the  customary 
and  universal  attempts  of  all  manufacturers, 
merchants  and  traders  engaged  in  interstate 
commerce  to  monopolize  a  fair  share  of  it  in 
the  necessary  conduct  and  desired  enlarge- 
ment of  their  trade,  while  their  attempts 
leave  their  competitors  free  to  make  success- 
ful endeavors  of  the  same  kind." 


166 

In  National  Cotton  Oil  Co.  v.  Texas  (197  U.  S., 
115),  the  constitutionality  of  certain  anti- 
trust acts  of  the  State  of  Texas  was  involved. 
In  the  course  of  his  opinion,  Mr.  Justice  Mc- 
KENNA  said  (p.  129) : 

"It  is  enough  to  say  that  the  idea  of 
monopoly  is  not  now  confined  to  a  grant  of 
privileges.  It  is  understood  to  include  a 
'  condition  produced  by  the  acts  of  mere  in- 
dividuals. '  Its  dominant  thought  now  is, 
to  quote  another,  '  the  notion  of  exclusive- 
ness  or  unity ' ;  in  other  words,  the  supres- 
sion  of  competition  by  the  unification  of  in- 
terest or  management,  or  it  may  be  through 
agreement  and  concert  of  action.  And  the 
purpose  is  so  definitely  the  control  of  prices 
that  monopoly  has  been  defined  to  be,  *  uni- 
fied tactics  with  regard  to  prices/  It  is  the 
power  to  control  prices  which  makes  the  in- 
ducement of  combinations  and  their  profit. 
It  is  such  power  that  makes  it  the  concern 
of  the  law  to  prohibit  or  limit  them." 

(4)  We  will  not  attempt  by  a  minute  com- 
parison of  these  various  definitions  to  reconcile 
them.  Some  of  them  are  obscured  by  the  use 
of  general  phrases  which  are  only  pertinent 
when  they  are  related  to  particular  conditions. 
A  concern  may  by  legitimate  growth  and  expan- 
sion and  by  entirely  legitimate  means  acquire 


167 

such  a  preponderance  of  a  particular  trade  as  to 
be  a  dominating  factor  in  that  trade,  but  it  can- 
not be  said  to  be  a  monopoly  in  a  legal  sense. 
Therefore,  "  dominating  a  trade  "  as  a  phrase  is 
only  applicable  in  connection  with  other  condi- 
tions. The  same  is  true  of  the  phrase  "  the  con- 
trol of  the  market."  There  may  be  a  perfectly 
legitimate  control  of  the  market  for  the  time 
being,  and  it  is,  therefore,  not  in  and  of  itself 
controlling.  This  is  true  of  the  power  to 
fix  prices,  as  it  is  a  power  which  inheres  in 
every  producer  to  the  extent  of  his  trade 
limited  only  by  economic  considerations. 
""  Unification  of  interest  or  management "  may 
result  from  entirely  legal  transactions  as  well 
as  illegal,  and  it  is  valueless  for  the  purposes 
of  definition  without  the  necessary  qualifica- 
tion. It  follows  that  these  various  conditions 
are  not  in  and  of  themselves  controlling.  There 
must  be  some  element  or  condition  out  of  which 
they  spring,  or  associated  with  them,  which  im- 
parts to  them  the  quality  of  a  monoply  in  a  legal 
sense.  The  clew  to  that  element  is  found  in  the 
statement  of  Judge  JACKSON  that  it  is  an  exclu- 
sive control  resulting  from  restrictions  and  re- 
straints which  "  operate  to  prevent  the  exercise 


168 

of  a  right  or  liberty  open  to  the  public  before  the 
monopoly  was  secured,"  and  the  statement  of 
Judge  SANBORN  that  it  is  "  an  exclusive  right  to 
or  the  exclusive  control  of  that  trade  "  embracing 
"  the  exclusion  of  all  others  from  that  right  and 
control."  But  the  question  still  arises  what  con- 
stitutes "  the  exclusion  of  all  others  "  or  "  a  re- 
striction or  restraint  "  which  operates  "  to  prevent 
the  exercise  of  a  right  or  liberty  open  to  the 
public  before  the  monopoly  was  secured."  The 
solution  in  part  at  least  is  found  in  the  first  section 
of  the  Act ;  that  is  an  exclusion  resulting  from 
contracts,  combinations  or  conspiracies  in  re- 
straint of  trade  such  as  are  therein  mentioned,  in 
such  volume  and  to  such  a  degree  as  to  constitute 
practically  an  exclusive  control,  is  monopol- 
ization or  an  attempt  to  monopolize.  There  are 
specific  contracts,  combinations  or  conspiracies 
which  do  not  reach  the  point  of  monopolization. 
There  may  be  such  contracts,  combinations  and 
conspiracies  which  in  their  effect  reach  that 
point.  Apart  from  such  contracts,  combinations 
and  conspiracies  there  may  be  other  acts  con- 
templated by  the  Act  as  constituting  the  act  of 
monopolization,  but  we  cannot  conceive  of  any 
such  acts  being  so  contemplated  unless  they  are 


169 

in  themselves  unlawful  or  tortious.  Hence  we 
submit  that  monopolization  within  the  Act  is  the 
exclusive  control  of  a  trade  which  is  the  natural 
effect  and  result  of  a  comprehensive  system  of 
such  contracts,  combinations  or  conspiracies, 
or  other  unlawful  or  tortious  acts.  In  other 
words,  to  monopolize  or  attempt  to  monopolize  a 
trade  means  the  control  of  it,  or  the  attempt  to 
control  it,  through  the  exclusion  of  others 
generally  from  it  by  the  means  and  agencies 
which  are  prohibited  and  declared  to  be  illegal 
by  Section  i  of  the  Act  or  by  other  means  and 
acts  which  are  in  and  of  themselves  unlawful  or 
tortious.  It  is  the  presence  of  such  means  or 
agencies  of  exclusion  that  constitutes  a 
monopolistic  domination  or  control  of  a  trade, 
and  in  their  absence,  size,  domination,  and  con- 
trol of  the  market  or  prices,  are  not  a  monopoly 
in  a  legal  sense.  It  is  not,  therefore,  a  final 
test  what  properties  and  plants  a  concern  owns, 
or  how  extensive  their  capacity  and  product  are, 
or  how  great  the  volume  of  its  business  is 
in  relation  to  the  whole  of  the  business  or  the 
business  of  anybody  else. 

It   is   to   be   borne   in   mind  that  as  this  is  a 
criminal  statute  it  is  to  be   assumed   in  its    con- 


170 

struction  that  the  Legislature  was  not  creating 
an  offense  without  indicating  with  a  fair  degree 
of  definiteness  what  acts  should  constitute  it. 
To  make  monopolizing  a  criminal  offense  with- 
out any  standard  for  judging  the  means  by 
which  the  exclusion  of  others  is  effected,  which 
is  essential  to  monopolizing,  would  be  an  in- 
tolerable situation.  The  conduct  of  a  trade 
consists  of  a  multitude  of  acts  varying  in 
their  ethical  quality.  Competition  is  a  state 
of  war.  One  man  may  push  it  to  the  extreme 
limits,  whilst  another  may  draw  the  boundary 
line  clear  inside  of  them.  Price  cutting  and  re- 
bating, collecting  information  of  the  trade  of 
competitors,  the  operation  of  companies  under 
other  names  to  obviate  prejudice  or  secure  an 
advantage,  or  for  whatever  reason,  are  all 
methods  of  competition.  Who  knows  where  the 
line  is  that  separates  "fairness"  in  these 
methods  from  "  unfairness  ?  "  What  legal 
standard  determines  what  is  "  fair  "  and  what  is 
"unfair?"  Lord  MORRIS  said  in  the  Mogul 
case  ([1892]  App.  Cas.,  p.  51)  that  the  question 
of  "  fairness  "  is  one  that  would  be  determined 
by  the  "idiosyncrasies  of  individual  judges," 
and  that  he  could  see  no  limit  to  competition  ex- 


171 

cept  the  invasion  of  the  legal  rights  of  another. 
Yet  competition  is  one  of  the  principal  means 
whereby  one  man  gets  the  better  of  his  fellows 
in  the  struggle  for  trade,  and  appropriates  to 
himself  an  ever  increasing  share  of  it,  even  ex- 
tending to  such  a  dominating  share  of  it  as  to 
constitute  what  is  called  control.  What  legal 
rules  or  standards  has  a  man  to  guide  him  in 
determining  when  his  methods  cross  an  imagin- 
ary line  between  fair  and  unfair,  so  that  his  suc- 
cess thereby  becomes  a  criminal  offense  ?  Those 
who  stand  upon  an  Act  which  encourages  com- 
petition cannot  complain  of  the  extermination 
which  competition  involves. 

It  is  unnecessary  to  multiply  instances.  We 
say  that  it  could  not  have  been  the  intention  of 
the  legislature  to  constitute  such  matters  ele- 
ments in  the  criminal  offense  of  monopolizing  a 
trade.  Contracts  in  restraint  of  trade  are  governed 
and  defined  by  fixed  legal  standards,  as  are  com- 
binations and  conspiracies  in  restraint  of  trade. 
There  is  no  uncertainty  in  denouncing  the  con- 
trol of  a  business  which  results  from  such  con- 
tracts, combinations  and  conspiracies  as  a  criminal 
offense,  because  a  man  would  then  know  whether 
his  acts  and  transactions  constituted  the  offense 


172 

prescribed  by  the  Act.  The  same  is  true  of  any 
other  unlawful  or  tortious  acts  of  exclusion.  But 
unfair  methods  of  competition  such  as  have  been 
indicated,  and  other  similar  methods  of  business, 
present  moral  rather  than  legal  problems  in  the 
solution  of  which  judges  and  juries  would  differ, 
and  no  man  could  know  whether  his  methods  of 
business  were  threatening  him  with  criminal 
consequences  or  not.  This  is  what  we  mean  by 
saying  that  the  Act  should  be  construed  to  con- 
stitute an  offense  consisting  of  elements  gov- 
erned by  legal  standards,  which  is  the  case  if  the 
monopolization  which  is  denounced  is  the  con- 
trol of  business  accomplished  by  the  means  de- 
clared to  be  illegal  by  the  first  section  of  the 
Act  or  by  means  otherwise  unlawful,  and 
that  it  should  not  be  construed  to  constitute 
the  offense  of  elements  that  are  outside  of 
the  domain  of  legal  standards,  and  so  vague,  in- 
definite and  uncertain  that  whether  a  crime  had 
been  committed  or  not  would  depend  upon  the 
idiosyncrasies  of  judges  and  juries. 

The  case  of  Swift  vs.  U.  S.  (196  U.  S.,  375) 
is  pertinent  in  connection  with  this  phase  of 
the  case.  The  defendants  named  in  the  bill 
were  a  number  of  corporations,  firms  and  indi- 


173 

viduals  engaged  in  the  business  of  buying  live 
stock,  slaughtering  it,  and  converting  it  into 
fresh  meats,  and  selling  the  fresh  meats  through- 
the  United  States,  controlling  nearly  the  whole 
trade.  It  was  alleged  that  they  had  combined 
to  monopolize  the  business.  It  was  not  charged 
or  contended  that  the  extent  of  the  business 
of  the  defendants  was  in  and  of  itself  a  monopoly. 
It  was  charged  that  monopolization  or  an  attempt 
to  monopolize  resulted  from  certain  specific  acts 
or  courses  of  conduct  of  the  combination,  such 
as  refraining  from  bidding  against  each  other  in 
purchasing  cattle  except  perfunctorily ;  bidding 
up  prices  for  a  few  days  higher  than  the  state  of 
the  trade  would  warrant  to  induce  stock  owners 
in  other  States  to  make  large  shipments  ;  the  ar- 
bitrary raising  and  lowering  of  prices  from  time 
to  time  ;  the  collusive  restriction  of  the  shipments 
of  meat ;  the  imposition  of  penalties  upon  their 
customers  for  deviations  from  certain  rules  ;  the 
keeping  of  a  black  list  of  customers  who  de- 
parted from  those  rnles  ;  and  obtaining  rebates 
from  railroad  companies.  The  case  in  its  mon- 
opoly aspect  turned  on  the  combination  for  those 
purposes,  and  it  was  the  use  of  the  specific  means 
alleged  which  was  enjoined,  and  not  the  com- 
bination for  any  other  purposes. 


174 

We  therefore  insist  that  to  monopolize,  or  at- 
tempt to  monopolize,  under  the  Act  of  1890,  is 
not  established  by  showing  that  a  concern  con- 
trols the  manufacture  and  sale  of  the  bulk  of 
any  particular  article,  or  that  it  dominates  the 
trade  in  that  article,  or  controls  the  price  thereof 
in  so  far  as  it  deals  in  the  article,  in  the  absence 
of  an  exclusive  control  of  the  character  indicated. 

(4)  Having  attempted  to  define  a  monopoly  it 
is  now  to  be  remarked  that  monopolization 
within  the  Act  is  confined  to  the  monopolization 
of  interstate  and  foreign  commerce  by  its  ex- 
press terms,  and  by  the  fact  that  production  and 
manufacture  are  not  interstate  commerce  or 
within  the  jurisdiction  of  congress.  Interstate 
commerce  does  not  begin  until  there  is  some 
interstate  transaction  of  sale  or  interstate 
movement  for  purposes  of  sale.  In  the  Swift 
case  (196  U.  S.,  p.  397)  it  was  said: 

"  Therefore  the  case  is  not  like  United 
States  v.  E.  C.  Knight  Co.,  156  U.  S.,  i, 
where  the  subject  matter  of  the  combina- 
tion was  manufacture  and  the  direct  object 
monopoly  of  manufacture  within  a  State. 
However  likely  monopoly  of  commerce 
among  the  states  in  the  article  manu- 
factured was  to  follow  from  the  agreement 


175 

it  was  not  a  necessary  consequence  nor  a 
primary  end.  Here  the  subject  matter  is 
sales  and  the  very  point  of  the  combination 
is  to  restrain  and  monopolize  commerce 
among  the  states  in  respect  of  such  sales. 
The  two  cases  are  near  to  each  other,  as 
sooner  or  later  always  must  happen  where 
lines  are  to  be  drawn,  but  the  line  between 
them  is  distinct." 

The  distinction  is  between  a  monopoly  in  the 
manufacture  of  an  article  and  a  monopoly  in  its 
sale.  The  extent  to  which  a  corporation  or  com- 
bination is  engaged  in  the  production  and  manu- 
facture of  an  article  is  one  thing ;  its  interstate 
commerce  is  an  entirely  different  thing.  It  may 
be  a  producing  and  manufacturing  monopoly 
and  yet  not  be  a  monopoly  with  respect  to  inter- 
state commerce  within  the  meaning  of  the  Act  of 
1890.  It  is  its  conduct  with  respect  to  interstate 
commerce  that  determines  whether  it  is  monop- 
olizing within  the  Act.  It  is  only  when  it  markets 
its  product  throughout  the  states  that  it  comes 
within  the  province  of  that  Act,  and  therefore 
the  question  must  always  be,  in  determining 
whether  there  is  monopolizing  within  the  Act, 
not  the  extent  of  its  manufacturing  capacity 
and  production,  but  whether  in  marketing  its 


176 

products  throughout  the  states  it  is  monopolizing 
or  attempting  to  monopolize  that  trade.  If 
competitors  generally  are  not  excluded  from  the 
trade  by  contracts,  combinations  or  conspiracies 
in  restraint  of  trade  or  other  unlawful 
acts  having  that  as  their  purpose  and 
effective  in  its  accomplishment  there  is  no 
monopolization.  The  question  here  is  therefore 
whether  by  such  means  refiners  and  dealers  gen- 
erally are  now  being  excluded  from  the  markets 
of  the  various  states  or  foreign  countries. 

(5)  We  have  specified  the  means  which 
are  charged  as  the  means  by  which  the 
alleged  monopolization  is  effected.  They  may 
be  condensed  as  follows  : 

(i)  Agreement  with  Tide- Water  Company, 
dated  October  9th,  1883 ;  (2)  contracts  with 
Pennsylvania  Railroad  Co.  of  August  22nd, 
1884  >  (3)  control  of  pipe  lines  and  unfair  prac- 
tices against  competing  lines ;  (4)  particular 
contracts  in  restraint  of  trade ;  (5)  combination 
with  railroads  to  obtain  discriminations ;  (6) 
methods  of  selling  lubricating  oils  to  railroads  ; 
(7)  unfair  methods  of  competition ;  (8)  and  di- 
vision of  territory. 


177 

All  of  these  matters  are  covered  by  the  Brief 
on  the  Facts  and  the  Summary  of  Facts  con- 
tained in  this  brief,  to  which  we  refer  to  avoid 
repetition,  simply  insisting  here  that  it  is  estab- 
lished that  there  is  no  monopolization  or  attempt 
to  monopolize. 


VII. 

The  only  relief,  if  any,  that  can  be 
granted  is  to  enjoin  specific  acts  or 
methods  in  restraint  of  interstate  trade, 
or  tending  to  its  monopolization  if  any 
such  are  found  to  exist. 

(i)  We  have  already  shown  that  it  is  not  the 
intent  of  the  Act,  or  within  the  power  of  Con- 
gress, to  limit  the  mannfacturing  properties  or 
plants  that  a  corporation  or  individual  may  ac- 
quire or  create ;  and  that  therefore,  the  common 
ownership  and  use  of  the  Standard  properties 
may  not  be  directly  or  indirectly  disturbed.  We 
have  also  shown  that  the  intrastate  sale  and 
marketing  of  the  products  is  not  within  the  Act 
or  the  jurisdiction  of  Congress.  The  only  sub- 
ject within  the  Act  is  interstate  and  foreign  com- 


178 

merce ;  that  is,  the  interstate  and  international 
marketing  and  sale  of  the  products.  If  it  should 
be  found  by  the  Court  that  the  Defendants, 
by  the  employment  of  any  particular  means, 
are  monopolizing  or  attempting  to  monop- 
olize that  particular  trade  then,  following 
the  precedent  of  Swift  vs.  the  United  States 
(196  U.  S.,  375),  the  proper  relief  is  to  enjoin 
those  means.  There  were  alleged  in  that  case 
certain  acts  or  courses  of  conduct  intended  to 
monopolize  the  trade.  The  injunction  granted 
by  the  Circuit  Court  restrained  the  defend- 
ants from  combining  to  restrain  interstate  trade 
by  doing  any  of  the  acts  or  pursuing  any 
of  the  courses  of  conduct  specifically  alleged^ 
"or  by  any  other  method  or  device  ",  and  also 
from  combining  together  to  monopolize  or  at- 
tempting to  monopolize  the  interstate  trade 
by  means  of  rebates  from  railroad  companies. 
The  Court  said  as  to  the  nature  of  the  action 
(P-  394) : 

"  To  sum  up  the  bill  more  shortly,  the 
charge  is,  a  combination  of  a  dominant  pro- 
portion of  the  dealers  in  fresh  meat  through- 
out the  United  States  not  to  bid  against 
each  other  in  the  live  stock  markets  of  the 
different  States  ;  to  bid  up  prices  for  a  few 


179 

days  in  order  to  induce  the  cattlemen  to 
send  their  stock  to  the  stock  yards  ;  to  fix 
prices  at  which  they  will  sell,  and  to  that 
end  to  restrict  shipments  of  meat  when 
necessary  ;  to  establish  a  uniform  rule  of 
credit  to  dealers,  and  to  keep  a  black-list ; 
to  make  uniform  and  improper  charges  for 
cartage,  and  finally,  to  get  less  than  lawful 
rates  from  the  railroads  to  the  exclusion  of 
competitors." 

After  considering  the  reasons  for  holding  the 
scheme  as  a  whole  to  be  within  the  reach  of  the 
Act  of  1890  the  Court  said  (p.  398) ; 

"  For  the  foregoing  reasons,  we  are  of 
opinion  that  the  carrying  out  of  the  scheme 
alleged,  by  the  means  set  forth,  properly  may 
be  enjoined,  and  that  the  bill  cannot  be  dis- 
missed." 

The  Court  then  reviewed  those  means  separ- 
ately and  held  that  each  of  them  as  a  part  of  a 
connected  scheme  was  sufficiently  brought  by 
the  allegations  within  the  provisions  of  the  Act 
of  1890  to  be  specifically  enjoined ;  but  the 
general  words  of  the  injunction  "  or  by  any  other 
method  or  device  the  purpose  and  effect  of  which 
is  to  restrain  commerce  as  aforesaid"  were 
stricken  out,  the  Court  saying  (P.  401) : 


180 

"  The  defendants  ought  to  be  informed  as 
accurately  as  the  case  permits  what  they 
are  forbidden  to  do.  Specific  devices  are 
mentioned  in  the  bill,  and  they  stand  pro- 
hibited. The  words  quoted  are  a  sweeping 
injunction  to  obey  the  law,  and  are  open  to 
the  objection  which  we  stated  at  the  be- 
ginning, that  it  was  our  duty  to  avoid,  to 
the  same  end  of  definiteness  so  far  as  ob- 
tainable, the  words  "  as  charged  in  the  bill" 
should  be  inserted  between  "  dealers  in  such 
meats  ''  and  "  the  effect  of  which  rules,"  and 
two  lines  lower,  as  to  charges  for  cartage, 
the  same  words  should  be  inserted  between 
"  dealers  and  consumers  "  and  "the  effect 
of  which." 

Further,  the  Court  said  (p.  402) : 

"  It  only  remains  to  add  that  the  foregoing 
question  does  not  apply  to  the  earlier  sec- 
tions which  charge  direct  restraints  of  trade 
within  the  decisions  of  the  Court,  and  that 
criticism  of  the  decree,  as  if  it  ran  generally 
against  combinations  in  restraint  of  trade, 
or  to  monopolize  trade,  ceases  to  have  any 
force  when  the  clause  against  "  any  other 
method  or  device  "  is  stricken  out.  So 
modified,  it  restrains  such  combinations  only 
to  the  extent  of  certain  specified  devices, 
which  the  defendants  are  alleged  to  have 
used  and  intend  to  continue  to  use." 

In  Addytone  Pipe   &  Steel  Co.  vs.  U.  S.  (175 
U.  S.,  211),  the  Court  said  (p.  247) : 


181 

"  The  views  above  expressed  lead  gener- 
ally to  an  affirmance  of  the  judgment  of 
the  Court  of  Appeals.  In  one  aspect,  how- 
ever, that  judgment  is  too  broad  in  its  terms 
— the  injunction  is  too  absolute  in  its  direc- 
tions .  .  .  as  it  may  be  construed  as 
applying  equally  to  commerce  wholly  within 
a  State  as  well  as  to  that  which  is  interstate 
or  international  only.  This  was  probably 
an  inadvertence  merely.  Although  the 
jurisdiction  of  Congress  over  commerce 
among  the  States  is  full  and  complete,  it  is 
not  questioned  that  it  has  none  over  that 
which  is  wholly  within  a  State,  and,  there- 
fore, none  over  combinations  or  agreements 
so  far  as  they  relate  to  a  restraint  of  such 
trade  or  commerce.  It  does  not  acquire  any 
jurisdiction  over  that  part  of  a  combination 
or  agreement  which  relates  to  commerce 
wholly  within  a  State,  by  reason  of  the  fact 
that  the  combination  also  covers  and  regu- 
lates commerce  which  is  interstate.  The 
latter  it  can  regulate,  while  the  former  is 
subject  alone  to  the  jurisdiction  of  the 
State.  ...  To  the  extent  that  the 
present  decree  includes  in  its  scope  the  en- 
joining of  defendants  thus  situated  from 
combining  in  regard  to  contracts  for  selling 
pipe  in  their  own  State,  it  is  modified  and 
limited  to  that  portion  of  the  combination  or 
agreement  which  is  interstate  in  its  charac- 
ter." 


182 

The  paragraph  of  the  opinion  immediately 
preceding  the  quotation  we  have  just  given  is  as 
follows  (p.  246) : 

"  It  is  almost  needless  to  add  that  we  do 
not  hold  that  every  private  enterprise  which 
may  be  carried  on  chiefly  or  in  part  by 
means  of  interstate  shipments  is,  therefore, 
to  be  regarded  as  so  related  to  interstate 
commerce  as  to  come  within  the  regulating 
power  of  Congress.  Such  enterprises  may 
be  of  the  same  nature  as  the  manufacturing 
of  refined  sugar  in  the  Knight  case, — that 
is,  the  parties  may  be  engaged  as  manufac- 
turers of  a  commodity  which  they  thereafter 
intend  at  some  time  to  sell,  and  possibly  to 
sell  in  another  State  ;  but  such  sale  we  have 
already  held  is  an  incident  to  and  not  the 
direct  result  of  the  manufacture,  and  so  is 
not  a  regulation  of,  or  an  illegal  interfer- 
ence with,  interstate  commerce.  That  prin- 
ciple is  not  affected  by  anything  herein 
decided." 

(2)  These  cases  clearly  furnish  the  principle 
which  should  govern  in  the  disposition  of  this 
case.  A  combination  is  alleged,  followed  by 
the  allegation  of  specific  acts  and  courses  of 
conduct  which  it  is  alleged  restrain  and  monop- 
olize interstate  commerce  in  oil.  The  only 
questions  that  can  be  raised  are  therefore  (i) 
Is  there  a  scheme  to  monopolize  interstate  trade 


183 

in  oil  by  the  specific  means  alleged ;  (2) 
are  the  means  adequate  ;  and  (3)  if  the  scheme 
exists,  which  of  the  particular  means  alleged 
are  now  being  employed?  If  any  of  those 
means  are  found  in  use  the  relief  to  be 
given  is  to  enjoin  the  monopolization  or 
attempt  to  monopolize  the  interstate  commerce 
in  oil  by  those  specific  means.  The  jurisdiction 
of  the  Court  extends  that  far  and  no  further.  It 
does  not  extend  to  the  ownership  of  the  refiner- 
ies because  under  the  Knight  case  production 
is  not  within  the  Act  or  subject  to  the 
jurisdiction  of  Congress.  It  does  not  extend  to 
the  intra-state  disposition  of  the  product  because 
that  is  domestic  commerce  not  within  the  Act 
or  subject  to  the  jurisdiction  of  Congress. 
And  under  the  Swift  case,  even  if  a  combina- 
tion exists  which  is  a  monopolization  of  or  an 
attempt  to  monopolize  a  particular  trade,  it  can- 
not be  generally  enjoined,  but  only  the  acts  and 
devices  to  effect  the  monopolization  which  are 
specifically  alleged,  as  they  are  in  the  bill  before 
the  Court,  can  be  enjoined.  The  case  is  precisely 
within  and  governed  by  the  principle  of  the 
Swift  case  as  to  the  relief  that  can  be  adminis- 
tered. 


184 

In  this  regard  the  case  is  entirely  different 
from  the  Northern  Securities  case.  That  was  a 
combination  for  the  control  of  two  interstate  rail- 
way systems  engaged  in  interstate  transporta- 
tion. Their  business  was  exclusively  transpor- 
tation, and  was  therefore  exclusively  commerce  as 
distinguished  from  production.  The  dominating 
element  of  their  business  was  interstate  transpor- 
tation, therefore  interstate  commerce.  The 
control  of  the  combination  was  reached  by 
the  prohibition  of  the  voting  power  of  the 
holding  company.  The  control  was  the  only 
device  alleged  as  the  means  whereby  in- 
terstate transportation  was  restrained,  and  the 
decree  necessarily  was  directed  at  that  control. 


POINT  VIII. 

There  is  no  basis  in  the  proofs  for  any 
decree  affecting  the  international  trade  of 
the  Defendants* 

It  appears  from  the  proofs  that  the  Standard 
Oil  Co.  (of  New  Jersey)  owns  the  shares  in 
whole  or  in  part  of  many  different  foreign  com- 


185 

panics  operating  exclusively  in  foreign  countries, 
none  of  which,  with  a  single  exception,  is 
a  party  to  this  proceeding.  The  only  exception 
is  the  Anglo-American  Oil  Co.,  Ltd.,  and  nothing 
is  shown  as  to  its  business  or  as  to  the  busi- 
ness of  the  other  foreign  companies.  All  that 
does  appear  is  that  about  60%  of  the  refined 
oil  is  marketed  in  foreign  countries.  The 
markets  in  foreign  countries  are  free  and  open 
to  everyone.  No  refiner  in  this  country  is 
restricted  in  any  way,  or  by  any  means,  from 
selling  all  the  oil  in  those  countries  which  he 
can  manufacture,  and  intercourse  with  those 
countries  is  just  as  open  to  them  as  to  the 
Standard.  There  is  no  evidence  that  they  are 
by  any  devices  or  acts  of  the  Standard  pre- 
vented or  restricted  from  access  to  those  markets. 
The  competition  there  is  with  all  the  foreign 
production,  and  the  conditions  which  exist  there 
govern  the  business  which  is  done.  We  fail  to 
see  any  ground  for  disturbing  the  marketing 
facilities  which  have  been  established  through- 
out the  world  by  means  of  the  foreign  companies. 
It  has  been  a  work  of  enormous  labor  and  ex- 
pense to  establish  those  facilities  and  they  secure 


186 


for  this  country  a  vast  trade  it  would  not  other- 
wise have  to  its  great  advantage  and  that  of  the 
people. 


POINT  IX. 

There  is  no  basis  in  the  proofs  for  any 
decree  severing  the  ownership  of  the  pipe 
line  companies. 

As  we  have  already  said,  these  companies  fall 
into  two  classes.  There  are  the  companies  which 
were  organized  by  the  owners  of  the  Standard 
properties  to  provide  purely  private  pipe  lines 
for  the  purposes  of  their  own  business.  They 
were  built  to  reach  the  oil  fields  and  provide  a 
regular  and  adequate  supply  of  crude  for  the 
refineries.  There  is  no  principle  upon  which 
their  ownership  should  be  severed,  particu- 
larly as  they  are  an  indispensable  adjunct  of  the 
refineries.  No  one  would  dream  now  of  building 
a  refinery  on  a  large  scale  without  a  pipe  line 
system  to  reach  the  oil  fields  for  the  crude 
supply.  To  separate  them  in  any  such  case 
would  be  to  amputate  an  essential  part  of  the  re- 
fining plants. 


187 

The  other  class  consists  of  the  common  carrier 
pipe  lines.  There  is  no  evidence  or  principle  jus- 
tifying their  severance.  They  are,  in  fact,  by  the 
nature  of  the  business  only  nominally  common 
carrier  lines.  The  development  of  the  business 
has  been  along  the  line  of  every  refinery 
having  its  own  associated  pipe  line  system, 
and  that  has  become  an  unalterable  condition  of 
the  business.  That  is  why  the  Standard's  pipe 
lines  are  not  in  fact  common  carrier  lines,  why 
they  are  not  used  as  such.  In  the  absence  of 
any  demand  or  need  for  their  use  by  others 
there  is  absolutely  no  basis  for  a  severance  of 
their  ownership  from  that  of  the  refineries. 

No  question  is  or  can  be  raised  as  to  the  cor- 
porate power  of  the  Standard  Oil  Company  (of 
New  Jersey)  to  own  and  hold  the  stocks  of  these 
companies. 


188 


X. 

There  is  no  basis  in  the  proofs  for  any 
decree  respecting  the  defendants  engaged 
in  the  natural  gas  business  or  the  owner- 
ship of  the  stocks  or  any  of  them  by  the 
Standard  Oil  Co.  (of  New  Jersey). 

There  is  no  evidence  affecting  these  compa- 
nies whatsoever.  They  are  not  engaged  in  the 
oil  business,  and  it  is  only  the  oil  business 
which  is  involved  in  this  proceeding  either  by 
the  allegations  of  the  bill  or  the  proofs.  They 
are  engaged  in  a  separate  and  distinct  business, 
which  is  the  supply  of  natural  gas  to  particular 
communities.  The  Standard  Oil  Co.  (of  New 
Jersey),  in  so  far  as  it  owns  the  stocks  of  any  of 
them,  is  authorized  by  its  charter  to  do  so,  and 
its  right  to  hold  them  is  not  challenged  by  any 
evidence  in  the  case. 

JOHN  G.  JOHNSON, 
JOHN  G.  MILBURN, 

Of  Counsel  for  the  Defendant  Standard 
Oil  Company  and  others. 

[2032] 


}&7 


